Results and Guidance for all Periods is
Adjusted to Reflect GEO’s 3-for-2 Stock Split
- 1Q17 Net Income Attributable to GEO
of $0.35 per Diluted Share
- 1Q17 Adjusted Net Income of $0.37
per Diluted Share
- 1Q17 Normalized FFO of $0.51 per
Diluted Share; 1Q17 AFFO of $0.65 per Diluted Share
- Updated Split-Adjusted FY17 Guidance
for GAAP Net Income Attributable to GEO of $1.27-$1.34 per Diluted
Share and Adjusted Net Income of $1.34-$1.41 per Diluted
Share
- Confirmed Split-Adjusted FY17
Guidance for Normalized FFO of $1.93-$2.00 per Diluted Share and
AFFO of $2.47-$2.53 per Diluted Share
The GEO Group, Inc. (NYSE: GEO) (“GEO”), a fully
integrated equity real estate investment trust (“REIT”) and a
leading provider of evidence-based offender rehabilitation and
community reentry services around the globe, reported today its
financial results for the first quarter 2017. GEO’s financial
results and guidance for all periods are presented on a
split-adjusted basis to reflect the recent 3-for-2 split of GEO’s
common stock.
First Quarter 2017 Highlights
- Net Income Attributable to GEO of
$0.35 per Diluted Share
- Adjusted Net Income of $0.37 per
Diluted Share
- Net Operating Income of $142.4
million
- Normalized FFO of $0.51 per Diluted
Share
- AFFO of $0.65 per Diluted
Share
GEO reported first quarter 2017 net income attributable to GEO
of $40.4 million, or $0.35 per diluted share, compared to $32.4
million, or $0.29 per diluted share, for the first quarter 2016.
GEO’s results for the first quarter 2017 include approximately $2.6
million, net of tax, in mergers and acquisitions related expenses
and a $0.3 million gain on sale of real estate assets, net of tax.
Adjusting for these items, GEO reported adjusted net income for the
first quarter 2017 of $42.7 million, or $0.37 per diluted
share.
GEO reported first quarter 2017 Normalized Funds From Operations
(“Normalized FFO”) of $58.1 million, or $0.51 per diluted share,
compared to $48.7 million, or $0.44 per diluted share, for the
first quarter 2016. GEO reported first quarter 2017 Adjusted Funds
From Operations (“AFFO”) of $74.0 million, or $0.65 per diluted
share, compared to $62.4 million, or $0.56 per diluted share, for
the first quarter 2016. GEO reported first quarter 2017 Net
Operating Income (“NOI”) of $142.4 million compared to $136.3
million for the first quarter 2016.
George C. Zoley, Chairman and Chief Executive Officer of GEO,
said, “We are pleased with our strong first quarter results, which
were driven by robust financial and operational performance across
our diversified platform of real estate, management and
programmatic services. Our diversified platform has allowed us to
provide cost-effective, high quality services for our government
partners while delivering industry-leading, evidence-based
rehabilitation programs to the men and women who have been
entrusted to our care. We’re also pleased to have been able to
confirm our split-adjusted Normalized FFO and AFFO guidance for the
full-year despite our recent equity offering of 10.4 million
split-adjusted shares in March of this year. We remain focused on
expanding the delivery of our services and programs and on the
effective allocation of capital to continue to enhance value for
our shareholders.”
GEO reported total revenues for the first quarter 2017 of $550.6
million up from $510.2 million for the first quarter 2016. First
quarter 2017 revenues reflect $57.2 million in construction
revenues associated with the development of the 1,300-bed Ravenhall
Facility in Australia (the “Ravenhall, Australia project”) compared
to $40.8 million in construction revenues for the first quarter
2016.
2017 Financial Guidance
GEO updated its financial guidance for the full-year 2017 and
issued financial guidance for the second quarter of 2017. GEO
expects full-year 2017 total revenue to be approximately $2.28
billion, including approximately $102 million in construction
revenue associated with GEO’s contract for the development and
operation of the Ravenhall, Australia project. GEO updated its
split-adjusted full-year 2017 guidance for Net Income Attributable
to GEO in a range of $1.27 to $1.34 per diluted share and Adjusted
Net Income in a range of $1.34 to $1.41 per diluted share. GEO
confirmed its split-adjusted full-year 2017 guidance for Normalized
FFO in a range of $1.93 to $2.00 per diluted share and AFFO in a
range of $2.47 to $2.53 per diluted share.
For the second quarter 2017, GEO expects total revenues to be in
a range of $581 million to $586 million, including approximately
$30 million in construction revenue associated with GEO’s contract
for the development and operation of the Ravenhall, Australia
project. For the second quarter 2017, GEO expects Net Income
Attributable to GEO to be in a range of $0.29 to $0.31 per diluted
share; Adjusted Net Income to be in a range of $0.31 to $0.33 per
diluted share; Normalized FFO in a range of $0.46 to $0.48 per
diluted share; and AFFO in a range of $0.59 to $0.61 per diluted
share.
GEO’s guidance reflects the 3-for-2 split of GEO’s common stock,
which was completed on April 24, 2017; the offering of 10,350,000
shares of GEO’s common stock, on a split-adjusted basis, which
closed on March 13, 2017; and the refinancing of GEO’s term loan
and revolving credit facilities, which was completed on March 23,
2017.
GEO’s guidance also reflects the recent acquisition of Community
Education Centers (“CEC”), which closed on April 5, 2017. As
previously disclosed, GEO expects the acquisition of CEC to
increase GEO’s total revenues by approximately $250 million on a
fully annualized basis. In addition, GEO anticipates annual net
synergies of approximately $5 million to be realized over 9 to 12
months. GEO expects the CEC acquisition to be 9-11% accretive
post-synergies to GEO’s pre-acquisition Adjusted EBITDA on a fully
annualized basis beginning in 2018.
Quarterly Dividend
On April 25, 2017, GEO’s Board of Directors declared a quarterly
cash dividend of $0.47 per share. GEO’s quarterly cash dividend
reflects the effect of the recent 3-for-2 split of GEO’s common
stock, which began trading at the split-adjusted price on April 25,
2017. The quarterly cash dividend will be paid on May 19, 2017 to
shareholders of record as of the close of business on May 9, 2017.
The declaration of future quarterly cash dividends is subject to
approval by GEO’s Board of Directors and to meeting the
requirements of all applicable laws and regulations. GEO’s Board of
Directors retains the power to modify its dividend policy as it may
deem necessary or appropriate in the future.
Reconciliation Tables and Supplemental Information
GEO has made available Supplemental Information which contains
reconciliation tables of Net Income Attributable to GEO to Net
Operating Income, EBITDA, and Adjusted EBITDA, and Net Income
Attributable to GEO to FFO, Normalized FFO and AFFO along with
supplemental financial and operational information on GEO’s
business segments and other important operating metrics. The
reconciliation tables are also presented herein. Please see the
section of this press release below titled “Note to Reconciliation
Tables and Supplemental Disclosure - Important Information on GEO’s
Non-GAAP Financial Measures” for information on how GEO defines
these supplemental Non-GAAP financial measures and reconciles them
to the most directly comparable GAAP measures. GEO’s Reconciliation
Tables can be found herein and in GEO’s Supplemental Information
which is available on GEO’s Investor Relations webpage at
investors.geogroup.com.
Conference Call Information
GEO has scheduled a conference call and simultaneous webcast for
today at 11:00 AM (Eastern Time) to discuss GEO’s first quarter
financial results as well as its progress and outlook. The call-in
number for the U.S. is 1-877-250-1553 and the international call-in
number is 1-412-542-4145. In addition, a live audio webcast of the
conference call may be accessed on the Events and Webcasts section
of GEO’s investor relations webpage at investors.geogroup.com. A
replay of the webcast will be available on the website for one
year. A telephonic replay of the conference call will be available
until May 16, 2017 at 1-877-344-7529 (U.S.) and 1-412-317-0088
(International). The participant passcode for the telephonic replay
is 10106159.
About The GEO Group
The GEO Group, Inc. (NYSE: GEO) is the first fully integrated
equity real estate investment trust specializing in the design,
financing, development, and operation of correctional, detention,
and community reentry facilities around the globe. GEO is the
world's leading provider of diversified correctional, detention,
community reentry, and electronic monitoring services to government
agencies worldwide with operations in the United States, Australia,
South Africa, and the United Kingdom. GEO's worldwide operations
include the ownership and/or management of 143 facilities totaling
approximately 100,000 beds, including projects under development,
with a growing workforce of approximately 23,500 professionals.
Note to Reconciliation Tables and Supplemental Disclosure
–Important Information on GEO’s Non-GAAP Financial
Measures
Net Operating Income, EBITDA, Adjusted EBITDA, Funds from
Operations, Normalized Funds from Operations, Adjusted Funds from
Operations, and Adjusted Net Income are non-GAAP financial measures
that are presented as supplemental disclosures. GEO has presented
herein certain forward-looking statements about GEO's future
financial performance that include non-GAAP financial measures,
including, Net Operating Income, Adjusted EBITDA, FFO, Normalized
FFO, and AFFO. The determination of the amounts that are excluded
from these non-GAAP financial measures is a matter of management
judgment and depends upon, among other factors, the nature of the
underlying expense or income amounts recognized in a given period.
While we have provided a high level reconciliation for the guidance
ranges for full year 2017, we are unable to present a more detailed
quantitative reconciliation of the forward-looking non-GAAP
financial measures to their most directly comparable
forward-looking GAAP financial measures because management cannot
reliably predict all of the necessary components of such GAAP
measures. The quantitative reconciliation of the forward-looking
GAAP financial measures will be provided for completed annual and
quarterly periods, as applicable, calculated in a consistent manner
with the quantitative reconciliation of non-GAAP financial measures
previously reported for completed annual and quarterly periods.
Net Operating Income is defined as revenues less operating
expenses, excluding depreciation and amortization expense, general
and administrative expenses, real estate related operating lease
expense, and start-up expenses, pre-tax. Net Operating Income is
calculated as net income attributable to GEO adjusted by
subtracting net loss attributable to non-controlling interests,
equity in earnings of affiliates, net of income tax provision, and
by adding income tax (benefit) provision, interest expense, net of
interest income, depreciation and amortization expense, general and
administrative expenses, real estate related operating lease
expense, and start-up expenses, pre-tax.
EBITDA is defined as Net Operating Income adjusted by
subtracting general and administrative expenses, real estate
related operating lease expense, and start-up expenses, pre-tax,
and by adding equity in earnings of affiliates, pre-tax. Adjusted
EBITDA is defined as EBITDA adjusted for net loss/income
attributable to non-controlling interests, stock-based compensation
expenses, pre-tax, and certain other adjustments as defined from
time to time, including for the periods presented M&A related
expenses, pre-tax, start-up expenses, pre-tax, and gain on sale of
real estate assets, pre-tax. Given the nature of our business as a
real estate owner and operator, we believe that EBITDA and Adjusted
EBITDA are helpful to investors as measures of our operational
performance because they provide an indication of our ability to
incur and service debt, to satisfy general operating expenses, to
make capital expenditures and to fund other cash needs or reinvest
cash into our business.
We believe that by removing the impact of our asset base
(primarily depreciation and amortization) and excluding certain
non-cash charges, amounts spent on interest and taxes, and certain
other charges that are highly variable from year to year, EBITDA
and Adjusted EBITDA provide our investors with performance measures
that reflect the impact to operations from trends in occupancy
rates, per diem rates and operating costs, providing a perspective
not immediately apparent from income from continuing
operations.
The adjustments we make to derive the non-GAAP measures of
EBITDA and Adjusted EBITDA exclude items which may cause short-term
fluctuations in income from continuing operations and which we do
not consider to be the fundamental attributes or primary drivers of
our business plan and they do not affect our overall long-term
operating performance. EBITDA and Adjusted EBITDA provide
disclosure on the same basis as that used by our management and
provide consistency in our financial reporting, facilitate internal
and external comparisons of our historical operating performance
and our business units and provide continuity to investors for
comparability purposes.
Funds From Operations, or FFO, is defined in accordance with
standards established by the National Association of Real Estate
Investment Trusts, or NAREIT, which defines FFO as net income/loss
attributable to common shareholders (computed in accordance with
United States Generally Accepted Accounting Principles), excluding
real estate related depreciation and amortization, excluding gains
and losses from the cumulative effects of accounting changes,
extraordinary items and sales of properties, and including
adjustments for unconsolidated partnerships and joint ventures.
Normalized Funds from Operations, or Normalized FFO, is defined as
FFO adjusted for certain items which by their nature are not
comparable from period to period or that tend to obscure GEO’s
actual operating performance, including for the periods presented
M&A related expenses, net of tax and start-up expenses, net of
tax.
Adjusted Funds From Operations, or AFFO, is defined as
Normalized FFO adjusted by adding non-cash expenses such as
non-real estate related depreciation and amortization, stock based
compensation expense, the amortization of debt issuance costs,
discount and/or premium and other non-cash interest, and by
subtracting recurring consolidated maintenance capital
expenditures.
Adjusted Net Income is defined as Net Income Attributable to GEO
adjusted for certain items which by their nature are not comparable
from period to period or that tend to obscure GEO’s actual
operating performance, including for the periods presented M&A
related expenses, net of tax, start-up expenses, net of tax, and
gain on sale of real estate assets, net of tax.
Because of the unique design, structure and use of our
correctional facilities, we believe that assessing the performance
of our correctional facilities without the impact of depreciation
or amortization is useful and meaningful to investors. Although
NAREIT has published its definition of FFO, companies often modify
this definition as they seek to provide financial measures that
meaningfully reflect their distinctive operations. We have modified
FFO to derive Normalized FFO and AFFO that meaningfully reflect our
operations.
Our assessment of our operations is focused on long-term
sustainability. The adjustments we make to derive the non-GAAP
measures of Normalized FFO and AFFO exclude items which may cause
short-term fluctuations in income from continuing operations but
have no impact on our cash flows, or we do not consider them to be
fundamental attributes or the primary drivers of our business plan
and they do not affect our overall long-term operating performance.
We may make adjustments to FFO from time to time for certain other
income and expenses that do not reflect a necessary component of
our operational performance on the basis discussed above, even
though such items may require cash settlement. Because FFO,
Normalized FFO and AFFO exclude depreciation and amortization
unique to real estate as well as non-operational items and certain
other charges that are highly variable from year to year, they
provide our investors with performance measures that reflect the
impact to operations from trends in occupancy rates, per diem
rates, operating costs and interest costs, providing a perspective
not immediately apparent from income from continuing
operations.
We believe the presentation of FFO, Normalized FFO and AFFO
provide useful information to investors as they provide an
indication of our ability to fund capital expenditures and expand
our business. FFO, Normalized FFO and AFFO provide disclosure on
the same basis as that used by our management and provide
consistency in our financial reporting, facilitate internal and
external comparisons of our historical operating performance and
our business units and provide continuity to investors for
comparability purposes. Additionally, FFO, Normalized FFO and AFFO
are widely recognized measures in our industry as a real estate
investment trust.
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 the second
quarter of 2017 and full year 2017, the assumptions underlying such
guidance, statements regarding the financial and operational impact
of the CEC acquisition, and statements regarding future project
activations and growth opportunities. 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 2017 given the various risks to which its business is
exposed; (2) the risk that the CEC acquisition will not be
integrated successfully or that such integration may be more
difficult, time-consuming, or costly than expected; (3) the risk
that synergies from the CEC transaction may not be fully realized
or may take longer than expected to realize; (4) the risk that the
expected increased revenues and Adjusted EBITDA from CEC may not be
fully realized or may take longer than expected to realize; (5)
GEO’s ability to declare future quarterly cash dividends and the
timing and amount of such future cash dividends; (6) GEO’s ability
to successfully pursue further growth and continue to create
shareholder value; (7) risks associated with GEO’s ability to
control operating costs associated with contract start-ups; (8)
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; (9) GEO’s ability
to win management contracts for which it has submitted proposals
and to retain existing management contracts; (10) GEO’s ability to
obtain future financing on acceptable terms; (11) GEO’s ability to
sustain company-wide occupancy rates at its facilities; (12) GEO’s
ability to access the capital markets in the future on satisfactory
terms or at all; (13) GEO’s ability to remain qualified as a REIT;
(14) the incurrence of REIT related expenses; and (15) other
factors contained in GEO’s Securities and Exchange Commission
periodic filings, including its Form 10-K, 10-Q and 8-K
reports.
First quarter financial tables to follow:
Condensed
Consolidated Statements of Operations
(Unaudited)
Q1 2017
Q1 2016 (unaudited) (unaudited)
Revenues $ 550,614 $ 510,185
Operating expenses
414,707 388,506
Depreciation and amortization 28,949 28,451
General and administrative expenses 42,586
34,061
Operating income 64,372
59,167 Interest income 11,977 4,557
Interest
expense (35,000 ) (29,366 )
Income before
income taxes and equity in earnings of affiliates 41,349
34,358 Provision for income taxes 2,470 3,151
Equity in earnings of affiliates, net of income tax
provision 1,487 1,119
Net
income 40,366 32,326 Less: Net loss
attributable to noncontrolling interests 37
24
Net income attributable to The GEO Group,
Inc. $
40,403 $ 32,350
Weighted Average Common Shares Outstanding:
Basic 113,599 110,813 Diluted 114,478 111,300
Income per
Common Share Attributable to The GEO Group, Inc. :
Basic: Net income per share — basic $
0.36 $
0.29 Diluted: Net income per share —
diluted $
0.35 $
0.29
Regular Dividends Declared per Common Share $ 0.47 $ 0.43
* all figures in '000s, except per share data
Reconciliation of
Net Income Attributable to GEO to Adjusted Net
Income
(In thousands, except per share
data)(Unaudited)
Adjusted Net Income
Reconciliation
Q1 2017
Q1 2016 Net Income attributable to GEO $
40,403 $ 32,350 Add: Start-up expenses, net of tax - 1,190
M&A related expenses, net of tax 2,584 - Gain on sale of real
estate assets, net of tax (261 ) -
Adjusted Net
Income $ 42,726 $ 33,540
Weighted average common shares outstanding - Diluted 114,478
111,300
Adjusted Net Income Per Diluted Share
$ 0.37 $ 0.30
Condensed
Consolidated Balance Sheets
(Unaudited)
As of As
of March 31, 2017 December 31, 2016
(unaudited)
ASSETS
Cash and
cash equivalents $ 434,559 $ 68,038 Restricted cash and investments
16,839 17,133 Accounts receivable, less allowance for doubtful
accounts 307,491 356,255 Contract receivable, current portion
237,649 224,033 Prepaid expenses and other current assets
28,992 32,210
Total current assets $
1,025,530
$
697,669 Restricted Cash and Investments
21,678 20,848
Property and Equipment, Net 1,909,698
1,897,241
Non-Current Contract Receivable 302,836 219,783
Deferred Income Tax Assets 30,039 30,039
Intangible
Assets, Net (including goodwill) 814,268 819,317
Other
Non-Current Assets 62,966 64,512
Total
Assets $
4,167,015 $
3,749,409
LIABILITIES AND
SHAREHOLDERS' EQUITY
Accounts payable $ 84,858 $ 79,637 Accrued
payroll and related taxes 51,282 55,260 Accrued expenses and other
current liabilities 119,908 131,096 Current portion of capital
lease obligations, long-term debt, and non-recourse debt
255,123 238,065
Total current liabilities $
511,171 $
504,058 Other Non-Current
Liabilities 89,308 88,656
Capital Lease Obligations
7,098 7,431
Long-Term Debt 2,089,499 1,935,465
Non-Recourse Debt 224,291 238,842
Shareholders'
Equity 1,245,648 974,957
Total Liabilities and
Shareholders' Equity $
4,167,015 $
3,749,409
* all figures in '000s
Reconciliation of
Net Income Attributable to GEO to FFO, Normalized FFO, and
AFFO
(Unaudited)
Q1 2017
Q1 2016 (unaudited) (unaudited)
Net Income attributable
to GEO $ 40,403 $ 32,350 Add: Real Estate Related Depreciation
and Amortization 15,386 15,142 Gain on sale of real estate assets,
net of tax (261 ) -
Equals: NAREIT defined FFO
$
55,528 $ 47,492 Add:
Start-up expenses, net of tax - 1,190 M&A related expenses, net
of tax 2,584 -
Equals: FFO, normalized $
58,112 $ 48,682 Add:
Non-Real Estate Related Depreciation & Amortization 13,563
13,309 Consolidated Maintenance Capital Expenditures (6,423 )
(5,240 ) Stock Based Compensation Expenses 4,963 3,241 Amortization
of debt issuance costs, discount and/or premium and other non-cash
interest 3,806 2,366
Equals: AFFO $
74,021 $ 62,358 Weighted
average common shares outstanding - Diluted 114,478 111,300
FFO/AFFO per Share - Diluted Normalized FFO Per
Diluted Share $
0.51 $ 0.44
AFFO Per Diluted Share $
0.65 $
0.56 Regular Common Stock Dividends per common
share $
0.47 $ 0.43 * all
figures in '000s, except per share data
Reconciliation of
Net Income Attributable to GEO to Net Operating Income, EBITDA and
Adjusted EBITDA
(Unaudited)
Q1 2017
Q1 2016 (unaudited) (unaudited)
Net Income attributable
to GEO $ 40,403 $ 32,350 Less Net
loss attributable to noncontrolling interests 37
24
Net Income $ 40,366
$ 32,326
Add (Subtract):
Equity in earnings of affiliates, net of income tax provision
(1,487 ) (1,119 ) Income tax provision 2,470 3,151 Interest
expense, net of interest income 23,023 24,809 Depreciation and
amortization 28,949 28,451 General and administrative expenses
42,586 34,061
Net Operating Income,
net of operating lease obligations $ 135,907
$ 121,679 Add: Operating lease
expense, real estate 6,483 12,681 Start-up expenses, pre-tax
- 1,939
Net Operating Income (NOI)
$ 142,390 $ 136,299
Subtract (Add): General and administrative expenses 42,586
34,061 Operating lease expense, real estate 6,483 12,681 Start-up
expenses, pre-tax - 1,939 Equity in earnings of affiliates, pre-tax
(2,098 ) (1,590 )
EBITDA $
95,419 $ 89,208
Adjustments Net loss attributable to noncontrolling interests 37 24
Stock based compensation expenses, pre-tax 4,963 3,241 Start-up
expenses, pre-tax - 1,939 M&A related expenses, pre-tax 2,620 -
Gain on sale of real estate assets, pre-tax (261 ) -
Adjusted EBITDA $ 102,778 $
94,412 * all figures in '000s
2017
Outlook/Reconciliation
(In thousands, except per share data)
(Unaudited)
FY 2017
Net Income Attributable to GEO $ 154,000 to $ 162,500
Real Estate Related Depreciation and Amortization
71,000 71,000
Funds from Operations
(FFO) $ 225,000 to
$ 233,500
Adjustments M&A and Transition Related
Expenses 8,000 8,000
Normalized
Funds from Operations $ 233,000 to
$ 241,500 Non-Real Estate Related
Depreciation and Amortization 61,000 61,000
Consolidated
Maintenance Capex (26,500 ) (27,000 )
Non-Cash Stock Based
Compensation and Non-Cash Interest Expense 31,000
31,000
Adjusted Funds From Operations (AFFO)
$ 298,500 to
$ 306,500
Net Cash Interest Expense 83,000 83,000
Consolidated Maintenance Capex 26,500 27,000
Income
Taxes 20,000 20,000
Adjusted
EBITDA $ 428,000 to
$
436,500 G&A Expenses 176,000
176,000
Non-Cash Stock Based Compensation (16,000 ) (16,000
)
Equity in Earnings of Affiliates (6,000 ) (6,000 )
M&A and Transition Related Expenses (8,000 ) (8,000 )
Real Estate Related Operating Lease Expense 30,000
30,000
Net Operating Income $
604,000 to
$ 612,500
FFO Per Diluted Share (Normalized) $ 1.93 to
$ 2.00 AFFO Per Diluted Share $
2.47 to
$ 2.53 Weighted Average Common
Shares Outstanding-Diluted 121,000 to 121,000
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170502005607/en/
The GEO Group, Inc.Pablo E. Paez, 866-301-4436Vice President,
Corporate Relations
Geo (NYSE:GEO)
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