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| The GEO Group Reports Fourth Quarter 2006 Results and Increases 2007 Guidance by $0.15 EPS |
BOCA RATON, Fla.--(BUSINESS WIRE)--Feb. 27, 2007--The GEO Group (NYSE:GEO) ("GEO") today reported fourth quarter and full-year 2006 financial results. GEO reported fourth quarter 2006 Income from Continuing Operations of $10.5 million, or $0.52 per share, based on 20.2 million diluted weighted average shares outstanding, compared with a loss of $1.3 million, or $0.09 per share, based on 15.0 million diluted weighted average shares outstanding in the fourth quarter of 2005. GEO reported 2006 Income from Continuing Operations of $30.3 million, or $1.70 per share, based on 17.9 million diluted weighted average shares outstanding, compared with $5.9 million, or $0.39 per share, based on 15.0 million diluted weighted average shares outstanding for 2005. Fourth quarter 2006 pro forma income from continuing operations increased 197% to $10.7 million, or $0.53 per share from $3.6 million, or $0.24 per share, in the fourth quarter of 2005. Pro forma income from continuing operations for 2006 increased 166% to $32.4 million, or $1.81 per share, from $12.2 million, or $0.81 per share, for 2005. 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. George C. Zoley, Chairman and Chief Executive Officer of GEO, said: "We are very pleased with our strong operational and financial performance during 2006. The primary factors driving our improved financial results are the successful acquisition and integration of Correctional Services Corporation in November 2005; stronger results at a number of our federal facilities due to improved contract terms and higher occupancy levels as a result of the U.S. Secure Border Initiative; and new contract wins by our three business units of U.S. Corrections, GEO Care, and International Services. "We continue to have a strong organic growth pipeline with projects totaling more than 5,400 beds under development representing more than $94 million in expected annual operating revenues. These projects are expected to start between the first quarter of 2007 and the second quarter of 2008. In addition, our successful acquisition of CentraCore Properties Trust allows our company to regain control of 11 important facilities and has positioned us to pursue future potential growth opportunities through the expansion of existing facilities." 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 fourth quarter and year-end 2006. Table 1. Reconciliation of Pro Forma Income from Continuing Operations to GAAP Income from Continuing Operations
(In thousands except per share 13 Weeks 13 Weeks 52 Weeks 52 Weeks
data) Ended Ended Ended Ended
31-Dec- 1-Jan-06 31-Dec- 1-Jan-06
06 06
-------- -------- -------- --------
Income from Continuing Operations $10,537 $(1,323) $30,308 $ 5,879
2006
Start-Up Expenses 926 2,045
Deferred Financing Fees - 803
International Tax Benefit (750) (750)
2005
International Tax Benefit (8,517) (8,517)
Start-Up Expenses 592 592
Michigan Impairment Charge 12,630 12,630
Job Reclassification Expenses 242 242
U.S. Job Creation Tax Benefit - (1,704)
Queens Transition Costs - 479
Deferred Financing Fees - 752
Jena, Louisiana Write-Off - 2,596
Insurance Adjustment - (789)
-------- -------- -------- --------
Pro Forma Income from Continuing
Operations $10,713 $ 3,624 $32,406 $12,160
======== ======== ======== ========
Diluted Earnings Per Share
Income from Continuing
Operations $ 0.52 $ (0.09) $ 1.70 $ 0.39
2006
Start-Up Expenses 0.05 0.11
Deferred Financing Fees - 0.04
International Tax Benefit (0.04) (0.04)
2005
International Tax Benefit (0.56) (0.56)
Start-Up Expenses 0.03 0.03
Michigan Impairment Charge 0.85 0.85
Job Reclassification Expenses 0.01 0.01
U.S. Job Creation Tax Benefit - (0.11)
Queens Transition Costs - 0.03
Deferred Financing Fees - 0.05
Jena, Louisiana Write-Off - 0.17
Insurance Adjustment - (0.05)
-------- -------- -------- --------
Diluted Pro Forma Earnings Per
Share $ 0.53 $ 0.24 $ 1.81 $ 0.81
======== ======== ======== ========
Weighted Average Shares
Outstanding 20,170 14,978 17,872 15,015
Revenue GEO reported a 50% increase in fourth quarter 2006 revenue to $247.4 million from $164.9 million in the fourth quarter of 2005. Fourth quarter 2006 revenue includes $37 million in pass-through construction revenues. GEO reported a 40% increase in 2006 revenue to $860.9 million from $612.9 million in 2005. 2006 revenue includes $74 million in pass-through construction revenues. Exclusive of pass-through construction revenues, GEO reported fourth quarter 2006 operating revenues of $210.4 million and year-end 2006 operating revenues of $786.9 million. U.S. Corrections revenue for 2006 increased to $612.8 million from $473.3 million for 2005. International Services revenue for 2006 increased to $103.6 million from $98.8 million for 2005. GEO Care revenue for 2006 increased to $70.4 million from $32.6 million for 2005. Adjusted EBITDA and Adjusted EBITDAR Fourth quarter 2006 Adjusted EBITDA increased 71% to $25.2 million from $14.7 million in the fourth quarter of 2005. Adjusted EBITDAR for the fourth quarter of 2006 increased 49% to $31.2 million from $20.9 million for the fourth quarter of 2005. Adjusted EBITDA for 2006 increased 86% to $91.2 million from $49.1 million for 2005. Adjusted EBITDAR for 2006 increased 54% to $116.9 million from $75.7 million for 2005. 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 and Adjusted EBITDAR. The following table presents a reconciliation from Adjusted EBITDA and Adjusted EBITDAR to GAAP Net Income for the fourth quarter and year-end 2006. Table 2. Reconciliation from Adjusted EBITDA and Adjusted EBITDAR to GAAP Net Income
(In thousands) 13 Weeks 13 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
31-Dec- 1-Jan-06 31-Dec-06 1-Jan-06
06
-------- --------- --------- ---------
Net Income $10,515 $ (807) $ 30,031 $ 7,006
Discontinued Operations 22 (516) 277 (1,127)
Interest Expense, Net 3,355 4,641 17,544 13,862
Income Tax Provision 5,363 (13,707) 16,505 (11,826)
Depreciation and
Amortization 4,467 4,949 22,235 15,876
-------- --------- --------- ---------
EBITDA $23,722 $ (5,440) $ 86,592 $ 23,791
Adjustments, Pre-tax
2006
Start-Up Expenses 1,494 3,298
Deferred Financing Fees - 1,295
2005
International Tax Benefit (2,057) (2,057)
Start-Up Expenses 977 977
Michigan Impairment Charge 20,859 20,859
Job Reclassification
Expenses 400 400
Queens Transition Costs - 798
Deferred Financing Fees - 1,360
Jena, Louisiana Write-Off - 4,255
Insurance Adjustment - (1,300)
-------- --------- --------- ---------
Adjusted EBITDA $25,216 $ 14,739 $ 91,185 $ 49,083
======== ========= ========= =========
Lease Rental Expense 5,960 6,123 25,700 26,611
-------- --------- --------- ---------
Adjusted EBITDAR $31,176 $ 20,862 $116,885 $ 75,694
======== ========= ========= =========
Adjusted Free Cash Flow Adjusted Free Cash Flow for the fourth quarter of 2006 increased 106% to $9.9 million from $4.8 million for the fourth quarter of 2005. Adjusted Free Cash Flow for 2006 increased 136% to $47.9 million from $20.3 million for 2005. 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 fourth quarter and year-end 2006. Table 3. Reconciliation of Adjusted Free Cash Flow to GAAP Income from Continuing Operations
(In thousands) 13 Weeks 13 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
31-Dec- 1-Jan-06 31-Dec-06 1-Jan-06
06
-------- --------- --------- ---------
Income from Continuing
Operations $10,537 $ (1,323) $ 30,308 $ 5,879
Depreciation and Amortization 4,467 4,949 22,235 15,876
Income Tax Provision 5,363 (13,707) 16,505 (11,826)
Income Taxes Paid (2,199) 3,068 (11,336) (632)
Stock Based Compensation
Included in G&A 424 - 1,341 -
Maintenance Capital
Expenditures (8,049) (7,979) (10,665) (13,564)
Equity in Earnings of
Affiliates, Net of Income Tax (538) (2,280) (1,576) (2,079)
Minority Interest (80) (202) (125) (742)
Write-off of Deferred Financing
Fees - - 1,295 1,360
Start-Up Expenses - 977 - 977
Michigan Impairment Charge - 20,859 - 20,859
Job Reclassification Expenses - 400 - 400
Queens Transition Costs - - - 798
Jena, Louisiana Write-Off - - - 4,255
Insurance Adjustment - - - (1,300)
-------- --------- --------- ---------
Adjusted Free Cash Flow $ 9,925 $ 4,762 $ 47,982 $ 20,261
======== ========= ========= =========
Important Information on GEO's Non-GAAP Financial Measures Pro Forma Income from Continuing Operations, Adjusted EBITDA, Adjusted EBITDAR, 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, Deferred Financing Fees, and the other items set forth in Table 1 above. Adjusted EBITDA is defined as EBITDA excluding Start-Up Expenses, Deferred Financing Fees, and the other items set forth in Table 2 above. Adjusted EBITDAR is defined as Adjusted EBITDA including Lease Rental Expense. 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 in Tables 1, 2, and 3 respectively set forth above in this press release. 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 GEO is increasing its 2007 earnings guidance to a pro forma range of $1.90 to $2.05 per share, exclusive of $0.12 per share in after-tax start-up expenses associated with facility openings. GEO expects 2007 operating revenues to be in the range of $890 million to $910 million exclusive of pass-through construction revenues. GEO expects first quarter 2007 earnings to be in a pro forma range of $0.37 to $0.39 per share, exclusive of $0.06 per share in after-tax start-up expenses. GEO expects first quarter 2007 operating revenues to be in the range of $215 million to $220 million exclusive of pass-through construction revenues. GEO expects second quarter 2007 earnings to be in a pro forma range of $0.47 to $0.51 per share, exclusive of $0.01 per share in after-tax start-up expenses. GEO expects second quarter 2007 operating revenues to be in the range of $221 million to $226 million exclusive of pass-through construction revenues. GEO expects third quarter 2007 earnings to be in a pro forma range of $0.50 to $0.54 per share, exclusive of $0.05 per share in after-tax start-up expenses. GEO expects third quarter 2007 operating revenues to be in the range of $224 million to $229 million exclusive of pass-through construction revenues. GEO expects fourth quarter 2007 earnings to be in a pro forma range of $0.56 to $0.61 per share. GEO expects fourth quarter 2007 operating revenues to be in the range of $230 million to $235 million exclusive of pass-through construction revenues. GEO's 2007 financial guidance does not include any potential contracts for the utilization of GEO's available bed capacity at the Northlake Correctional Facility in Baldwin, Michigan or the LaSalle Correctional Facility in Jena, Louisiana. The upper end of GEO's 2007 earnings guidance includes a modest contribution from increased utilization of the New Castle Correctional Facility in New Castle, Indiana.
2007 Operating Revenue Guidance (In Millions)
(Exclusive of Pass-Through Construction Revenue)
---------------------------------------------------------------------
1Q 2007 2Q 2007 3Q 2007 4Q 2007
--------------------------------------------------------
Previously
Issued
Guidance
---------------------------------------------------------------------
Revised
Guidance
(February
27, 2007) $215 - $220 $221 - $226 $224 - $229 $230 - $235
---------------------------------------------------------------------
2007 Earnings
Per Share
-------------
1Q 2007 2Q 2007 3Q 2007 4Q 2007
--------------------------------------------------------
Previously
Issued GAAP
Guidance
After-Tax
Start-Up
Expenses
Previously
Issued Pro
Forma
Guidance
---------------------------------------------------------------------
Revised GAAP
Guidance
(February
27, 2007) $0.31 - $0.33 $0.46 - $0.50 $0.45 - $0.49 $0.56 - $0.61
After-Tax
Start-Up
Expenses $0.06 $0.01 $0.05 -
---------------------------------------------------------------------
Revised Pro
Forma
Guidance
(February
27, 2007) $0.37- $0.39 $0.47 - $0.51 $0.50 - $0.54 $0.56 - $0.61
---------------------------------------------------------------------
Diluted
Weighted
Average
Shares
Outstanding
(In
Millions) 20.2 20.2 20.2 20.2
FY 2007
--------------
Previously
Issued
Guidance $880 - $905
---------------------------
Revised
Guidance
(February
27, 2007) $890 - $910
---------------------------
2007 Earnings
Per Share
-------------
FY 2007
--------------
Previously
Issued GAAP
Guidance $1.65 - $1.80
After-Tax
Start-Up
Expenses $0.10
Previously
Issued Pro
Forma
Guidance $1.75 - $1.90
---------------------------
Revised GAAP
Guidance
(February
27, 2007) $1.78 - $1.93
After-Tax
Start-Up
Expenses $0.12
---------------------------
Revised Pro
Forma
Guidance
(February
27, 2007) $1.90 - $2.05
---------------------------
Diluted
Weighted
Average
Shares
Outstanding
(In
Millions) 20.2
Conference Call Information GEO has scheduled a conference call and simultaneous webcast at 3:00 PM (Eastern Time) today to discuss GEO's fourth quarter 2006 financial results as well as GEO's progress and outlook. The call-in number for the U.S. is 800-299-0148 and the international call-in number is 617-801-9711. The participant pass-code for the conference call is 94502562. 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 March 27, 2007 at 888-286-8010 (U.S.) and 617-801-6888 (International). The pass-code for the telephonic replay is 28385790. 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, Canada, and the United Kingdom. GEO's worldwide operations include 64 correctional and residential treatment facilities with a total design capacity of approximately 55,000 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.
Fourth quarter and year-end financial tables to follow:
THE GEO GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN AND FIFTY-TWO WEEKS ENDED
DECEMBER 31, 2006 AND JANUARY 1, 2006
(In thousands, except per share data)
(UNAUDITED)
Thirteen Weeks Fifty-two Weeks
Ended Ended
------------------- -------------------
December January December January
31, 2006 1, 2006 31, 2006 1, 2006
--------- --------- --------- ---------
Revenues $247,404 $164,874 $860,882 $612,900
Operating expenses 210,246 159,227 718,178 540,128
Depreciation and amortization 4,467 4,949 22,235 15,876
General and administrative
expenses 13,894 13,165 56,268 48,958
--------- --------- --------- ---------
Operating income 18,797 (12,467) 64,201 7,938
Interest income 2,881 2,281 10,687 9,154
Interest expense (6,236) (6,922) (28,231) (23,016)
Write off of deferred
financing fees from
extinguishment of debt -- -- (1,295) (1,360)
--------- --------- --------- ---------
Income before income taxes,
minority interest, equity in
earnings of affiliate and
discontinued operations 15,442 (17,108) 45,362 (7,284)
Provision for income taxes 5,363 (13,707) 16,505 (11,826)
Minority interest (80) (202) (125) (742)
Equity in earnings (loss) of
affiliate 538 2,280 1,576 2,079
--------- --------- --------- ---------
Income from continuing
operations 10,537 (1,323) 30,308 5,879
Income (loss) from
discontinued operations (22) 516 (277) 1,127
--------- --------- --------- ---------
Net income $ 10,515 $ (807) $ 30,031 $ 7,006
========= ========= ========= =========
Weighted-average common shares
outstanding:
Basic 19,405 14,493 17,221 14,370
========= ========= ========= =========
Diluted 20,170 14,978 17,872 15,015
========= ========= ========= =========
Income per common share:
Basic:
Income from continuing
operations $ 0.54 $ (0.09) $ 1.76 $ 0.41
Income (loss) from
discontinued operations 0.00 0.03 (0.02) 0.08
--------- --------- --------- ---------
Net income per share-
basic $ 0.54 $ (0.06) $ 1.74 $ 0.49
========= ========= ========= =========
Diluted:
Income from continuing
operations $ 0.52 $ (0.09) $ 1.70 $ 0.39
Income (loss) from
discontinued operations 0.00 0.04 (0.02) 0.08
--------- --------- --------- ---------
Net income per share-
diluted $ 0.52 $ (0.05) $ 1.68 $ 0.47
========= ========= ========= =========
The GEO Group, Inc. - Operating Data
13 Weeks 13 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
December January 1, December January 1,
31, 2006 2006 31, 2006 2006
---------- ---------- ----------- -----------
(a)Revenue-producing beds 48,873 43,187 48,873 43,187
(a)Compensated man-days 4,154,112 3,161,501 15,788,208 12,607,525
(a)Average occupancy(1) 98.5% 99.0% 97.4% 97.5%
(a)Includes South Africa
(1)Does not include GEO's idle facilities.
THE GEO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2006 and January 1, 2006
2006 2005
--------- ---------
(In thousands,
except per
share data)
ASSETS
Current Assets
Cash and cash equivalents $111,520 $ 57,094
Restricted cash 13,953 8,882
Accounts receivable, less allowance for doubtful
accounts of $926 and $224 162,867 127,612
Deferred income tax asset 19,492 19,755
Other current assets 14,922 15,826
Current assets of discontinued operations -- 123
--------- ---------
Total current assets 322,754 229,292
--------- ---------
Restricted Cash 19,698 17,484
Property and Equipment, Net 287,374 282,236
Assets Held for Sale 1,610 5,000
Direct Finance Lease Receivable 47,367 38,492
Deferred Income Tax Assets 4,941 --
Goodwill and Other Intangible Assets, Net 41,554 52,127
Other Non Current Assets 18,155 14,880
--------- ---------
$743,453 $639,511
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 48,890 $ 27,762
Accrued payroll and related taxes 31,320 26,985
Accrued expenses 77,675 70,177
Current portion of deferred revenue 1,830 1,894
Current portion of capital lease obligations,
long-term debt and non-recourse debt 12,685 8,441
Current liabilities of discontinued operations 1,303 1,260
--------- ---------
Total current liabilities 173,703 136,519
--------- ---------
Deferred Revenue 1,755 3,267
Deferred Tax Liability -- 2,085
Minority Interest 1,297 1,840
Other Non Current Liabilities 24,816 19,601
Capital Lease Obligations 16,621 17,072
Long-Term Debt 144,971 219,254
Non-Recourse Debt 131,680 131,279
Total shareholders' equity 248,610 108,594
--------- ---------
$743,453 $639,511
========= =========
CONTACT: The GEO Group |