The GEO Group (NYSE: GEO) (“GEO”) announced today that
its Board of Directors (the “Board”) has unanimously approved a
plan to terminate its Real Estate Investment Trust (“REIT”)
election and become a taxable C corporation, effective for the
fiscal year ending December 31, 2021. The decision stems from the
Board’s evaluation of GEO’s corporate tax structure and REIT
status, which was announced on April 7, 2021.
The Board also voted unanimously to discontinue GEO’s quarterly
dividend. The change in corporate status from a REIT to a taxable C
Corporation is expected to give GEO additional flexibility to
allocate free cash flow towards reducing net recourse debt. GEO has
made efforts to reduce net recourse debt over the last two years.
In 2020, GEO reduced net recourse debt by approximately $100
million, and in the first three quarters of 2021, GEO reduced net
recourse debt by an additional $175 million.
George C. Zoley, Executive Chairman of GEO, said, “The decision
made by our Board to de-REIT is consistent with the proactive and
multifaceted approach we have implemented to address our future
debt maturities, which includes our focus on net recourse debt
reduction and deleveraging, our review of potential sales of
Company-owned assets and businesses, and our ongoing evaluation of
capital structure alternatives with the assistance of our financial
and legal advisors. We believe that these are prudent steps, which
are in the best interests of our shareholders and other
stakeholders. Following our objective of net recourse debt
reduction, we expect to allocate free cash flow to fund quality
growth opportunities and potentially return capital to shareholders
in the future.”
Updated 2021 Guidance
As a result of GEO’s restructuring to a taxable C corporation in
fiscal year 2021, during the fourth quarter of 2021, GEO expects to
incur a one-time, non-cash deferred tax charge of approximately $75
million. GEO also expects to incur approximately $34 million in
incremental income tax expense in the fourth quarter of 2021 due to
the resulting higher corporate tax rate for 2021, including a
catch-up tax expense of approximately $26 million in connection
with the first three quarters of 2021.
Due to the tax related corporate restructuring items, GEO
expects to report a loss in Net Income Attributable to GEO for the
fourth quarter of 2021 of approximately $69 million. Excluding the
one-time, non-cash deferred tax charge and the portion of
additional income tax expense associated only with the first three
quarters of 2021, GEO expects fourth quarter 2021 Adjusted Net
Income to be between $0.29 and $0.31 per diluted share and fourth
quarter 2021 AFFO to be between $0.58 and $0.60 per diluted share,
which reflects the higher quarterly corporate tax rate GEO expects
to pay as a taxable C corporation.
Due to the tax related corporate restructuring items, GEO
expects full-year 2021 Net Income Attributable to GEO to be in a
range of $70 million to $72 million. Excluding the non-cash
deferred tax charge, GEO expects full-year 2021 Adjusted Net Income
to be in a range of $1.14 to $1.16 per diluted share and full-year
2021 AFFO to be in a range of $2.30 to $2.32 per diluted share,
which reflects the higher annual corporate tax rate GEO expects to
pay as a taxable C corporation. GEO confirmed its previously issued
full-year 2021 Adjusted EBITDA guidance in a range of $451.5
million to $455 million.
About The GEO Group
The GEO Group, Inc. (NYSE: GEO) is a leading diversified
government service provider, specializing in design, financing,
development, and support services for secure facilities, processing
centers, and community reentry centers in the United States,
Australia, South Africa, and the United Kingdom. GEO’s diversified
services include enhanced in-custody rehabilitation and
post-release support through the award-winning GEO Continuum of
Care®, secure transportation, electronic monitoring,
community-based programs, and correctional health and mental health
care. GEO’s worldwide operations include the ownership and/or
delivery of support services for 107 facilities totaling
approximately 86,000 beds, including idle facilities and projects
under development, with a workforce of up to approximately 18,500
employees.
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 and adversely affect actual
results, including statements regarding GEO’s expectations
regarding the timing and amount of the incurrence of the one-time,
non-cash deferred tax charge and the incremental income tax
expense, financial guidance for the fourth quarter and full-year of
2021, and GEO’s proposed steps to address its future debt
maturities, including but not limited to its planned transition to
a taxable C corporation, the termination of its REIT election, and
the discontinuation of its quarterly dividend. Forward-looking
statements generally can be identified by the use of
forward-looking terminology such as “may,” “will,” “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” or
“continue” or the negative of such words and similar expressions.
Risks and uncertainties 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 the fourth quarter and
full-year of 2021 given the various risks to which its business is
exposed; (2) GEO’s ability to deleverage and repay, refinance or
otherwise address its debt maturities in an amount or on the
timeline it expects, or at all; (3) GEO’s ability to identify and
successfully complete any potential sales of additional
Company-owned assets and businesses on commercially advantageous
terms on a timely basis, or at all; (4) changes in federal and
state government policy, orders, directives, legislation and
regulations that affect public-private partnerships with respect to
secure correctional and detention facilities, processing centers,
and reentry centers, including the timing and scope of
implementation of President Biden's Executive Order directing the
U.S. Attorney General not to renew the U.S. Department of Justice
contracts with privately operated criminal detention facilities;
(5) changes in federal immigration policy; (6) public and political
opposition to the use of public-private partnerships with respect
to secure correctional and detention facilities, processing
centers, and reentry centers; (7) the magnitude, severity, and
duration of the current COVID-19 global pandemic, its impact on
GEO, GEO's ability to mitigate the risks associated with COVID-19,
and the efficacy and distribution of COVID-19 vaccines; (8) GEO’s
ability to sustain or improve company-wide occupancy rates at its
facilities in light of the COVID-19 global pandemic and policy and
contract announcements impacting GEO’s federal facilities in the
United States; (9) fluctuations in our operating results, including
as a result of contract terminations, contract renegotiations,
changes in occupancy levels and increases in our operating costs;
(10) general economic and market conditions, including changes to
governmental budgets and its impact on new contract terms, contract
renewals, renegotiations, per diem rates, fixed payment provisions,
and occupancy levels; (11) 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; (12) GEO’s ability to win management contracts for which it
has submitted proposals and to retain existing management
contracts; (13) risks associated with GEO’s ability to control
operating costs associated with contract start-ups; (14) GEO’s
ability to successfully pursue growth, continue to create
shareholder value, and potentially return capital to shareholders
in the future; (15) GEO’s ability to obtain financing or access the
capital markets in the future on acceptable terms or at all; (16)
other factors contained in GEO’s Securities and Exchange Commission
periodic filings, including its Form 10-K, 10-Q and 8-K reports,
many of which are difficult to predict and outside of GEO’s
control.
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version on businesswire.com: https://www.businesswire.com/news/home/20211202005319/en/
Pablo E. Paez (866) 301 4436 Executive Vice President, Corporate
Relations
Geo (NYSE:GEO)
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