The GEO Group, Inc. to Acquire Correctional Services Corporation; Plans to Divest Juvenile Services Division
July 14 2005 - 10:00AM
PR Newswire (US)
The GEO Group, Inc. to Acquire Correctional Services Corporation;
Plans to Divest Juvenile Services Division * All cash transaction
for $6.00 per share * Expected to be approximately 15% accretive in
2006 * Investor Conference Call scheduled for 2:00 PM (Eastern
Time) * Investor Conference Call Participant Pass-code: 76556483
BOCA RATON, Fla., July 14 /PRNewswire-FirstCall/ -- The GEO Group,
Inc. (NYSE:GGI) ("GEO"), a world leader in the delivery of
correctional and mental health services, announced today the
signing of a definitive merger agreement (the "definitive
agreement") to acquire Sarasota-based Correctional Services
Corporation (NASDAQ:CSCQ) ("CSC"), a leading developer and manager
of privatized correctional and detention facilities. CSC has
contracts and awards for the operation of 15 adult correctional
facilities with a design capacity of approximately 7,500 beds. In
addition, CSC provides juvenile programs for adjudicated youths at
17 facilities with an approximate capacity of 1,300 beds through
its subsidiary, Youth Services International, Inc. ("YSI"). (Logo:
http://www.newscom.com/cgi-bin/prnh/20031201/FLM015LOGO ) Under the
terms of the definitive agreement approved by the boards of
directors of both GEO and CSC, shareholders of CSC will receive
$6.00 cash per common share or approximately $62 million, and GEO
will assume $124 million of CSC debt. The closing of the
acquisition, which is subject to the approval of CSC's
shareholders, federal regulatory agencies and other customary
conditions, is targeted for the beginning of the fourth quarter of
2005. GEO also announced that it plans to divest CSC's juvenile
services division (the "juvenile business") following the closing
of the acquisition. Although GEO believes that the future growth
prospects of the juvenile business are positive, the business is
outside of GEO's core focus. GEO has entered into discussions with
James F. Slattery, the present Chief Executive Officer of CSC, to
sell Mr. Slattery the juvenile business. These discussions
commenced recently and are progressing well. As a result, GEO is
optimistic that a deal with Mr. Slattery can be reached in the near
future. In the event that GEO cannot reach an agreement with Mr.
Slattery, GEO would seek alternative buyers for the juvenile
business. Upon the closing of the CSC acquisition and assuming the
divestiture of the juvenile business, GEO will have 55 facilities
with a total design capacity of approximately 43,500 beds. George
C. Zoley, Chairman and Chief Executive Officer of GEO, said, "We
have been exploring acquisition opportunities since we became an
independent company in July 2003, and we are very pleased with the
fact that we were able to find a quality company in our core
business of correctional and detention services. This acquisition
is an excellent strategic fit for our company that will have a
positive impact on our financial performance and will increase our
ability to pursue new business opportunities while continuing to
enhance shareholder value. We are also excited about the community
correctional services offered by CSC, which will broaden our
service offerings and expand our relationships with existing
clients. Furthermore, our existing regional operating structure
will enable us to integrate CSC's facilities on a cost- efficient
basis. Assuming the acquisition is completed in the beginning of
the fourth quarter of 2005, we expect to fully integrate CSC's
operations by year- end 2005." Committed Financing GEO plans to
finance the acquisition of CSC through the use of $42 million in
cash, supplemented by a committed senior credit facility
underwritten by BNP Paribas for $175 million. This senior credit
facility will be comprised of a $75 million term-loan and a $100
million revolver and, in addition to funding the acquisition, will
refinance GEO's existing $41 million term-loan and provide
liquidity for general corporate purposes. GEO will assume $124
million of CSC debt. Financial and Legal Advisers Lehman Brothers
acted as GEO's financial adviser and provided the GEO board of
directors with a fairness opinion. Akerman Senterfitt served as
GEO's legal advisor. Updated 2005 Guidance GEO is re-affirming its
second quarter 2005 revenue guidance in the range of $148 million
to $154 million and its second quarter 2005 earnings guidance in
the range of $0.40 to $0.42 per share, inclusive of a $0.17 per
share tax benefit related to the repatriation of foreign earnings
in the fourth quarter of 2004 as a result of the American Jobs
Creation Act of 2004. On a standalone basis, GEO is revising its
third and fourth quarter 2005 as well as its full-year 2005
guidance: * GEO expects third quarter 2005 revenues to be in the
range of $140 million to $147 million and third quarter 2005
earnings to be in the range of $0.33 to $0.36 per share. This
revision in projected earnings from operations for the third
quarter of 2005 is based upon an expectation of continued lower
occupancy at GEO's San Diego, California Detention Facility for the
U.S. Marshals Service; reduced revenues for the month of July
related to the transition of GEO's Queens, New York Detention
Facility from the Bureau of Immigration and Customs Enforcement to
the U.S. Marshals Service; and additional employee healthcare
insurance costs. * GEO expects fourth quarter 2005 revenues to be
in the range of $140 million to $147 million and fourth quarter
2005 earnings to be in the range of $0.36 to $0.39 per share. This
revision in projected earnings from operations for the fourth
quarter of 2005 is based upon a modest occupancy improvement at
GEO's San Diego, California Detention Facility for the U.S.
Marshals Service; reduced profitability under the new U.S. Marshals
Service contract for the Queens, New York Detention Facility; and
one month of additional employee healthcare insurance costs. * GEO
expects full-year 2005 revenues to be in the range of $582 million
to $602 million and full-year 2005 earnings to be in the range of
$1.38 to $1.46 per share. These amounts exclude the impact of the
CSC acquisition. 2006 Guidance On a standalone basis, GEO expects
full-year 2006 revenues to be in the range of $630 million to $650
million and full-year 2006 earnings to be in the range of $1.76 to
$1.88 per share. This guidance includes the assumption of full
operational responsibility at GEO's 200-bed South Florida
Evaluation and Treatment Center on January 1, 2006, with annual
revenues of approximately $24 million. GEO is also assuming the
activation of a new mental health facility in early 2006, with
annual revenues of approximately $15 million; and the establishment
of a new employee healthcare insurance program which is expected to
reduce employee healthcare insurance costs from the elevated levels
in 2005. CSC Acquisition Impact on Guidance Assuming the
acquisition of CSC is completed in the beginning of the fourth
quarter of 2005: * GEO expects third quarter 2005 revenues to be in
the range of $140 million to $147 million and third quarter 2005
earnings to be in the range of $0.21 to $0.24 per share. This
guidance includes a third quarter 2005 write-off of approximately
$2.0 million in deferred financing costs, or $0.12 per share. * GEO
expects fourth quarter 2005 revenues to be in the range of $167
million to $174 million and fourth quarter 2005 earnings to be in
the range of $0.36 to $0.39 per share. During the transition period
in the fourth quarter of 2005, GEO expects the impact of CSC's
operations to be neutral to earnings. * GEO expects full-year 2005
revenues to be in the range of $609 million to $629 million and
full-year 2005 earnings to be in the range of $1.26 to $1.34 per
share, which includes the impact of the $2.0 million deferred
financing charge. * In 2006, GEO expects CSC's operations to add
approximately $95 million to $105 million of revenue and to result
in earnings in the range of $2.03 to $2.15 per share, exclusive of
approximately $2.0 to $3.0 million in costs associated with the
start-up and phase-in of CSC's 1,000-bed expansion of its Florence,
Arizona State Prison. Conference Call Information GEO has scheduled
an investor conference call and simultaneous webcast at 2:00 PM
(Eastern Time) today to discuss the planned acquisition. Hosting
the call will be George C. Zoley, Chairman and Chief Executive
Officer, accompanied by Wayne H. Calabrese, Vice Chairman,
President and Chief Operating Officer; John G. O'Rourke, Senior
Vice President and Chief Financial Officer; and David Watson,
Treasurer and Vice President of Finance. The call-in number for the
U.S. and Canada is 1-800-706-7741 and the international call-in
number is 1-617-614-3471. The participant pass-code for the
conference call is 76556483. In addition, a live webcast of the
conference call may be accessed on GEO's investor relations home
page at http://www.thegeogroupinc.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 August 14, 2005 at
1-888-286-8010 (U.S. and Canada) and 1-617-801-6888
(International). The participant pass-code for the telephonic
replay is 28905846. About The GEO Group, Inc. The GEO Group, Inc.
("GEO") is a world leader in the delivery of correctional and
detention management, health and mental health, and other
diversified 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 Canada managing 41 facilities with a total design
capacity of approximately 36,000 beds. About Correctional Services
Corporation Correctional Services Corporation ("CSC") is a leading
developer and operator of adult correctional facilities, with
contracts and awards for the operation of 15 facilities with
approximately 7,500 beds. In addition, through its Youth Services
International ("YSI") subsidiary, CSC is a leading private provider
of juvenile programs for adjudicated youths with 17 facilities and
1,300 juveniles in its care. Forward-Looking Statements This press
release contains forward-looking statements regarding future events
and future performance of the Company 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 complete the acquisition of Correctional Services
Corporation; (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.
http://www.newscom.com/cgi-bin/prnh/20031201/FLM015LOGO
http://photoarchive.ap.org/ DATASOURCE: The GEO Group, Inc.
CONTACT: Pablo E. Paez, Director, Corporate Relations of The GEO
Group, +1-866-301-4436 Web site: http://www.thegeogroupinc.com/
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