- 1Q19 Net Income Attributable to GEO of $0.34 per diluted share
- 1Q19 Adjusted Net Income of $0.35 per diluted share
- 1Q19 AFFO of $0.67 per diluted share
-
Updated FY19 guidance for Net Income Attributable to GEO of
$1.42-$1.48 per diluted share and Adjusted Net Income of $1.44 to
$1.50 per diluted share - Updated FY19 AFFO guidance of $2.64-$2.70 per diluted share
BOCA RATON, Fla.–(BUSINESS WIRE)–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 of 2019.
First Quarter 2019 Highlights
-
Net Income Attributable to GEO of $40.7 million or $0.34 per
diluted share - Adjusted Net Income of $0.35 per diluted share
- Net Operating Income of $161.8 million
- Normalized FFO of $0.50 per diluted share
- AFFO of $0.67 per diluted share
GEO reported first quarter 2019 net income attributable to GEO of $40.7
million, or $0.34 per diluted share, compared to $35.0 million, or $0.29
per diluted share, for the first quarter 2018. GEO reported total
revenues for the first quarter 2019 of $610.7 million up from $564.9
million for the first quarter 2018. First quarter 2019 results reflect a
$1.5 million loss on real estate assets. Excluding this loss, GEO
reported first quarter 2019 Adjusted Net Income of $42.2 million, or
$0.35 per diluted share.
GEO reported first quarter 2019 Normalized Funds From Operations
(“Normalized FFO”) of $60.3 million, or $0.50 per diluted share,
compared to $52.6 million, or $0.43 per diluted share, in the first
quarter 2018. GEO reported first quarter 2019 Adjusted Funds From
Operations (“AFFO”) of $80.3 million, or $0.67 per diluted share,
compared to $69.8 million, or $0.57 per diluted share, in the first
quarter 2018.
George C. Zoley, Chairman and Chief Executive Officer of GEO, said, “We
are pleased with our strong quarterly financial and operational
performance, as well as, our improved outlook for the balance of the
year. We have taken important steps to reactivate our idle capacity, and
we are proud of the continued success of our GEO Continuum of Care
enhanced rehabilitation and post-release programs. We remain focused on
effectively allocating capital to enhance long-term value for our
shareholders, and we believe we will continue to have access to
cost-effective capital to support the growth and expansion of our
high-quality services.”
Quarterly Dividend
On April 3, 2019, GEO’s Board of Directors declared a quarterly cash
dividend of $0.48 per share. The quarterly cash dividend was paid on
April 22, 2019 to shareholders of record as of the close of business on
April 15, 2019. 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.
Stock Repurchase Program
GEO did not repurchase any shares of its common stock during the first
quarter of 2019 and currently has approximately $105 million in
available authorization under the $200 million stock repurchase program
approved by GEO’s Board of Directors, which is effective through October
20, 2020.
The stock repurchase program is intended to be implemented through
purchases made from time to time in the open market or in privately
negotiated transactions, in accordance with applicable Securities and
Exchange Commission requirements. The stock repurchase program does not
obligate GEO to purchase any specific amount of its common stock and may
be suspended or extended at any time at the discretion of GEO’s Board of
Directors.
2019 Financial Guidance
GEO updated its initial financial guidance for the full-year and issued
financial guidance for the second quarter 2019.
GEO expects full-year 2019 total revenue to be approximately $2.47
billion. GEO expects full-year 2019 Net Income Attributable to GEO to be
in a range of $1.42-$1.48 per diluted share and Adjusted Net Income to
be in a range of $1.44-$1.50 per diluted share.
GEO expects full-year 2019 AFFO to be in a range of $2.64-$2.70 per
diluted share and Adjusted EBITDAre to be in a range of $482.5 million
to $489.5 million.
GEO’s updated full-year 2019 guidance reflects the recently announced
reactivation of GEO’s 1,000-bed South Louisiana ICE Processing Center
during the third quarter of 2019. Full-year 2019 guidance does not
assume the reactivation of GEO’s approximately 4,000 remaining idle beds
or any additional share repurchases under GEO’s share repurchase program.
For the second quarter 2019, GEO expects total revenues to be in a range
of $607 million to $612 million. GEO expects second quarter 2019 Net
Income Attributable to GEO to be in a range of $0.35 to $0.37 per
diluted share and Adjusted Net Income to be in a range of $0.36 to $0.38
per diluted share. GEO expects second quarter 2019 AFFO to be in a range
of $0.65 to $0.67 per diluted share.
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, Net Income to EBITDAre (EBITDA for real estate) and Adjusted
EBITDAre (Adjusted EBITDA for real estate), and Net Income Attributable
to GEO to FFO, Normalized FFO and AFFO, along with supplemental
financial and operational information on GEO’s business and other
important operating metrics, and in this press release, Net Income
Attributable to GEO to Adjusted Net Income. The reconciliation tables
are also presented herein. Please see the section 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 available on GEO’s investor 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 2019 financial
results as well as its 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 under the News, Events and Reports
tab 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 14,
2019 at 1-877-344-7529 (U.S.) and 1-412-317-0088 (International). The
participant passcode for the telephonic replay is 10130411.
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 134 facilities totaling approximately 95,000 beds,
including projects under development, with a growing workforce of
approximately 23,000 professionals.
Note to Reconciliation Tables and Supplemental Disclosure –
Important
Information on GEO’s Non-GAAP Financial Measures
Net Operating Income, EBITDAre, Adjusted EBITDAre, 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 Adjusted
Net Income, 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 2019, 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 non-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 adjusted by subtracting 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 gain/loss on real estate assets, pre-tax.
EBITDAre (EBITDA for real estate) is defined as net income adjusted by
adding provisions for income tax, interest expense, net of interest
income, depreciation and amortization, and gain/loss on real estate
assets, pre-tax. Adjusted EBITDAre (Adjusted EBITDA for real estate) is
defined as EBITDAre adjusted for net loss attributable to
non-controlling interests, stock-based compensation expenses, pre-tax,
and certain other adjustments as defined from time to time. Given the
nature of our business as a real estate owner and operator, we believe
that EBITDAre and Adjusted EBITDAre 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,
EBITDAre and Adjusted EBITDAre 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 net income attributable to GEO.
The adjustments we make to derive the non-GAAP measures of EBITDAre and
Adjusted EBITDAre 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. EBITDAre
and Adjusted EBITDAre 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 net
Tax Cuts and Jobs Act (“TCJA”) impact and tax effect of adjustments to
FFO.
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 net TCJA impact,
gain/loss on real estate assets, pre-tax, and tax effect of adjustments
to Net Income Attributable to GEO.
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
net income attributable to GEO 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 Net Income Attributable to GEO.
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 full year and second
quarter 2019, the assumptions underlying such guidance, the continued
expansion and success of our GEO Continuum of Care, and statements
regarding growth opportunities and allocation of capital to enhance
long-term value for our shareholders. 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 2019 given the various
risks to which its business is exposed; (2) GEO’s ability to implement
its stock repurchase program and the timing and amounts of any future
stock repurchases; (3) GEO’s ability to declare future quarterly cash
dividends and the timing and amount of such future cash dividends; (4)
GEO’s ability to successfully pursue further growth and continue to
create shareholder value; (5) risks associated with GEO’s ability to
control operating costs associated with contract start-ups; (6) 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; (7) GEO’s ability to win
management contracts for which it has submitted proposals and to retain
existing management contracts; (8) GEO’s ability to obtain future
financing on acceptable terms; (9) GEO’s ability to sustain company-wide
occupancy rates at its facilities; (10) GEO’s ability to access the
capital markets in the future on satisfactory terms or at all; (11) the
impact of any future regulations or guidance on the Tax Cuts and Jobs
Act; (12) GEO’s ability to remain qualified as a REIT; (13) the
incurrence of REIT related expenses; and (14) 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 2019 financial tables to follow:
|
Condensed Consolidated Balance Sheets* (Unaudited) |
||||||
| As of | As of | |||||
| March 31, 2019 | December 31, 2018 | |||||
| (unaudited) | (unaudited) | |||||
| ASSETS | ||||||
| Cash and cash equivalents | $ | 67,728 | $ | 31,255 | ||
| Restricted cash and cash equivalents | 53,749 | 51,678 | ||||
| Accounts receivable, less allowance for doubtful accounts | 423,596 | 445,526 | ||||
| Contract receivable, current portion | 16,005 | 15,535 | ||||
| Prepaid expenses and other current assets | 43,535 | 57,768 | ||||
| Total current assets | $ | 604,613 | $ | 601,762 | ||
| Restricted Cash and Investments | 27,282 | 22,431 | ||||
| Property and Equipment, Net | 2,150,627 | 2,158,610 | ||||
| Contract Receivable | 368,698 | 368,178 | ||||
| Operating Lease Right-of-Use Assets, Net | 133,365 | – | ||||
| Assets Held for Sale | 4,607 | 2,634 | ||||
| Deferred Income Tax Assets | 29,924 | 29,924 | ||||
| Intangible Assets, Net (including goodwill) | 1,003,143 | 1,008,719 | ||||
| Other Non-Current Assets | 61,807 | 65,860 | ||||
| Total Assets | $ | 4,384,066 | $ | 4,258,118 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Accounts payable | $ | 93,458 | $ | 93,032 | ||
| Accrued payroll and related taxes | 58,079 | 76,009 | ||||
| Accrued expenses and other current liabilities | 189,174 | 204,170 | ||||
| Operating lease liabilities, current portion | 35,210 | – | ||||
|
Current portion of finance lease obligations, long-term debt, and non-recourse debt |
332,864 | 332,027 | ||||
| Total current liabilities | $ | 708,785 | $ | 705,238 | ||
| Deferred Income Tax Liabilities | 13,681 | 13,681 | ||||
| Other Non-Current Liabilities | 79,734 | 82,481 | ||||
| Operating Lease Liabilities | 102,238 | – | ||||
| Finance Lease Liabilities | 4,179 | 4,570 | ||||
| Long-Term Debt | 2,433,433 | 2,397,227 | ||||
| Non-Recourse Debt | 15,112 | 15,017 | ||||
| Total Shareholders’ Equity | 1,026,904 | 1,039,904 | ||||
| Total Liabilities and Shareholders’ Equity | $ | 4,384,066 | $ | 4,258,118 | ||
| * all figures in ‘000s | ||||||
|
Condensed Consolidated Statements of (Unaudited) |
|||||||
| Q1 2019 | Q1 2018 | ||||||
| (unaudited) | (unaudited) | ||||||
| Revenues | $ | 610,667 | $ | 564,917 | |||
| Operating expenses | 456,997 | 426,709 | |||||
| Depreciation and amortization | 32,469 | 31,926 | |||||
| General and administrative expenses | 46,424 | 41,832 | |||||
| Operating income | 74,777 | 64,450 | |||||
| Interest income | 8,396 | 9,099 | |||||
| Interest expense | (40,280 | ) | (35,869 | ) | |||
| Income before income taxes and equity in earnings of affiliates | 42,893 | 37,680 | |||||
| Provision for income taxes | 4,840 | 4,755 | |||||
| Equity in earnings of affiliates, net of income tax provision | 2,596 | 1,995 | |||||
| Net income | 40,649 | 34,920 | |||||
| Less: Net loss attributable to noncontrolling interests | 56 | 67 | |||||
| Net income attributable to The GEO Group, Inc. | $ | 40,705 | $ | 34,987 | |||
| Weighted Average Common Shares Outstanding: | |||||||
| Basic | 118,774 | 121,768 | |||||
| Diluted | 119,496 | 122,304 | |||||
|
Net income per Common Share Attributable to The GEO Group, Inc. : |
|||||||
| Basic: | |||||||
| Net income per share — basic | $ | 0.34 | $ | 0.29 | |||
| Diluted: | |||||||
| Net income per share — diluted | $ | 0.34 | $ | 0.29 | |||
| Regular Dividends Declared per Common Share | $ | 0.48 | $ | 0.47 | |||
| * all figures in ‘000s, except per share data | |||||||
|
Reconciliation of Net Income Attributable (In thousands, except per share data)(Unaudited) |
||||||||
| Q1 2019 | Q1 2018 | |||||||
| Net Income attributable to GEO | $ | 40,705 | $ | 34,987 | ||||
| Add: | ||||||||
| Net Tax Cuts and Jobs Act Impact | – | 304 | ||||||
| Gain/Loss on real estate assets, pre-tax | 1,497 | (98 | ) | |||||
| Tax effect of adjustments to Net Income attributable to GEO | (45 | ) | – | |||||
| Adjusted Net Income | $ | 42,157 | $ | 35,193 | ||||
| Weighted average common shares outstanding – Diluted | 119,496 | 122,304 | ||||||
| Adjusted Net Income Per Diluted Share | $ | 0.35 | $ | 0.29 | ||||
|
Reconciliation of Net Income Attributable (Unaudited) |
||||||
| Q1 2019 | Q1 2018 | |||||
| (unaudited) | (unaudited) | |||||
| Net Income attributable to GEO | $ | 40,705 | $ | 34,987 | ||
| Add (Subtract): | ||||||
| Real Estate Related Depreciation and Amortization | 18,103 | 17,388 | ||||
| Gain/Loss on real estate assets | 1,497 | (98) | ||||
| Equals: NAREIT defined FFO | $ | 60,305 | $ | 52,277 | ||
| Add (Subtract): | ||||||
| Net Tax Cuts and Jobs Act Impact | – | 304 | ||||
| Tax Effect of adjustments to Funds From Operations ** | (45) | – | ||||
| Equals: FFO, normalized | $ | 60,260 | $ | 52,581 | ||
| Add (Subtract): | ||||||
| Non-Real Estate Related Depreciation & Amortization | 14,366 | 14,538 | ||||
| Consolidated Maintenance Capital Expenditures | (3,634) | (5,323) | ||||
| Stock Based Compensation Expenses | 6,727 | 5,827 | ||||
|
Amortization of debt issuance costs, discount and/or premium and other non-cash interest |
2,563 | 2,138 | ||||
| Equals: AFFO | $ | 80,282 | $ | 69,761 | ||
| Weighted average common shares outstanding – Diluted | 119,496 | 122,304 | ||||
| FFO/AFFO per Share – Diluted | ||||||
| Normalized FFO Per Diluted Share | $ | 0.50 | $ | 0.43 | ||
| AFFO Per Diluted Share | $ | 0.67 | $ | 0.57 | ||
| Regular Common Stock Dividends per common share | $ | 0.48 | $ | 0.47 | ||
| * all figures in ‘000s, except per share data | ||||||
| ** tax adjustments related to Gain/Loss on real estate assets | ||||||
|
Reconciliation of Net Income Attributable (Unaudited) |
||||||
| Q1 2019 | Q1 2018 | |||||
| (unaudited) | (unaudited) | |||||
| Net Income attributable to GEO | $ | 40,705 | $ | 34,987 | ||
| Less | ||||||
| Net loss attributable to noncontrolling interests | 56 | 67 | ||||
| Net Income | $ | 40,649 | $ | 34,920 | ||
| Add (Subtract): | ||||||
| Equity in earnings of affiliates, net of income tax provision | (2,596) | (1,995) | ||||
| Income tax provision | 4,840 | 4,755 | ||||
| Interest expense, net of interest income | 31,884 | 26,770 | ||||
| Depreciation and amortization | 32,469 | 31,926 | ||||
| General and administrative expenses | 46,424 | 41,832 | ||||
| Net Operating Income, net of operating lease obligations | $ | 153,670 | $ | 138,208 | ||
| Add: | ||||||
| Operating lease expense, real estate | 6,608 | 7,781 | ||||
| Gain/Loss on real estate assets, pre-tax | 1,497 | (98) | ||||
| Net Operating Income (NOI) | $ | 161,775 | $ | 145,891 | ||
| Q1 2019 | Q1 2018 | |||||
| (unaudited) | (unaudited) | |||||
| Net Income | $ | 40,649 | $ | 34,920 | ||
| Add (Subtract): | ||||||
| Income tax provision ** | 5,199 | 5,461 | ||||
| Interest expense, net of interest income | 31,884 | 26,770 | ||||
| Depreciation and amortization | 32,469 | 31,926 | ||||
| Gain/Loss on real estate assets, pre-tax | 1,497 | (98) | ||||
| EBITDAre | $ | 111,698 | $ | 98,979 | ||
| Add (Subtract): | ||||||
| Net loss attributable to noncontrolling interests | 56 | 67 | ||||
| Stock based compensation expenses, pre-tax | 6,727 | 5,827 | ||||
| Adjusted EBITDAre | $ | 118,481 | $ | 104,873 | ||
| * all figures in ‘000s | ||||||
| ** including income tax provision on equity in earnings of affiliates | ||||||
Contacts
Pablo E. Paez
(866) 301 4436
Executive Vice President,
Corporate Relations
