The GEO Group Reports First Quarter 2013 Results

  The GEO Group Reports First Quarter 2013 Results

  *1Q13 Income from Continuing Operations per Share up 43.5%
  *1Q13 Normalized FFO up 52.1%; 1Q13 AFFO up 51.2%
  *Confirms 2013 Guidance – AFFO of $200-210 million, $2.78 to $2.92 per
    Diluted Share; Annual Dividend of $2.00 per Diluted Share
  *Signs Definitive Agreement to Purchase 1,287-Bed Joe Corley Detention
    Center

Business Wire

BOCA RATON, Fla. -- May 08, 2013

The GEO Group, Inc. (NYSE: GEO) (“GEO”), the world’s leading provider of
diversified correctional, detention, and community reentry services, reported
today its financial results for the first quarter 2013.

First Quarter 2013 Highlights

  *Income from Continuing Operations of $0.33 Per Diluted Share
  *Pro Forma Income from Continuing Operations of $0.38 Per Diluted Share
  *Net Operating Income of $96.2 million
  *Normalized FFO of $0.55 Per Diluted Share
  *AFFO of $0.69 Per Diluted Share

For the first quarter 2013, GEO reported Normalized FFO of $39.6 million, or
$0.55 per diluted share, an increase of 52.1% from $26.0 million, or $0.43 per
diluted share, for the first quarter 2012. GEO reported first quarter 2013
AFFO of $49.6 million, or $0.69 per diluted share, an increase of 51.2% from
$32.8 million, or $0.54 per diluted share, for the first quarter 2012.

Net operating income for the first quarter 2013 increased to $96.2 million
from $89.3 million for the first quarter of 2012. Net operating income, or
gross profit, is defined as revenues less operating expenses, excluding
depreciation and amortization expense and general and administrative expenses.

George C. Zoley, Chairman and Chief Executive Officer of GEO, said: “We are
pleased with our first quarter results and confirmed outlook for 2013, which
continue to reflect strong operational and financial performance from our
diversified business units. During the first quarter, we achieved several
important milestones with the issuance of senior notes at a historically low
interest rate and the amendment of our senior credit facility. These important
steps will give us additional flexibility as we continue our efforts to
maximize value for our shareholders.”

GEO reported total revenues for the first quarter 2013 of $377.0 million
compared to total revenues of $360.0 million for the first quarter 2012. GEO
reported first quarter 2013 income from continuing operations of $0.33 per
diluted share, compared to $0.23 per diluted share for the first quarter 2012.
GEO’s first quarter 2013 earnings reflect $3.7 million, after-tax, in one-time
expenses associated with GEO’s conversion to a Real Estate Investment Trust
(“REIT”). Excluding these one-time expenses, GEO reported Pro Forma income
from continuing operations of $0.38 per diluted share, for the first quarter
2013 compared to $0.29 per diluted share for the first quarter 2012.

Net Operating Income, Funds from Operations (“FFO”), Normalized Funds from
Operations (“Normalized FFO”), and Adjusted Funds From Operations (“AFFO”) are
widely used non-GAAP supplemental financial measures of REIT performance. GEO
also uses Pro Forma Income from Continuing Operations and Adjusted EBITDA as
Non-GAAP supplemental financial measures. Please see the section of this press
release below entitled “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.

Joe Corley Detention Center

GEO announced today the signing of a definitive agreement for the purchase of
the 1,287-bed Joe Corley Detention Center (the “Center”) for $65 million. The
Center, which is owned by Montgomery County, Texas, houses federal detainees
for U.S. Immigration and Customs Enforcement. GEO already manages the Center
under a contract with Montgomery County. The Center is expected to generate
approximately $27 million in total annual revenues. The acquisition of the
Center is expected to generate returns consistent with GEO’s owned facilities.
GEO expects to close the transaction during the second quarter of 2013.

Senior Notes Offering and Senior Credit Facility Amendment

On March 19, 2013, GEO completed an offering of $300 million aggregate
principal amount of senior unsecured notes due 2023 (the “Notes”). The Notes
were issued with a coupon and yield to maturity of 5.125%. On April 3, 2013,
GEO completed an amendment and restatement to its senior credit facility.
Following the amendment, GEO’s senior credit facility is comprised of a $300
million Term Loan B due April 2020 bearing interest at LIBOR plus 2.50% (with
a LIBOR floor of 0.75%) and a $700 million Revolving Credit Facility due April
2018 bearing interest at LIBOR plus 2.50% (with no LIBOR floor). As of April
4, 2013, the Revolving Credit Facility had approximately $240 million in
outstanding borrowings along with approximately $60 million of Letters of
Credit issued thereunder.

GEO used borrowings under the amended and restated senior credit facility
along with the net proceeds from the Notes to refinance GEO’s previous senior
credit facility and pay related fees, costs, and expenses.

2013 Financial Guidance

GEO updated its previously issued financial guidance for 2013 and issued
additional financial guidance for the second quarter 2013. GEO expects full
year 2013 AFFO to be in a range of $2.78 to $2.92 per diluted share, or $200
million to $210 million. On a GAAP basis, GEO expects its income from
continuing operations for the full year 2013 to be in a range of $1.58 to
$1.68 per diluted share, including $8 million, after-tax, in one-time expenses
related to GEO’s REIT conversion and the write-off of deferred financing fees
in connection with GEO’s recently completed amendment to its senior credit
facility. GEO’s current annual dividend is $2.00 per share.

GEO expects full year 2013 revenues to be in a range of $1.51 billion to $1.55
billion. GEO’s full year 2013 Net Operating Income is expected to be in a
range of $410 million to $420 million, and full year 2013 Adjusted EBITDA is
expected to be in a range of $320 million to $330 million.

GEO’s 2013 guidance reflects the expected purchase of the Joe Corley Detention
Center during the second quarter 2013 as well as the offering of $300 million
in senior unsecured notes completed on March 19, 2013 and the amendment to
GEO’s senior credit facility completed on April 3, 2013.

Further, GEO’s 2013 guidance does not assume the potential reactivation of
approximately 6,000 current beds in inventory which GEO is actively marketing
to local, state, and federal customers.

With respect to the second quarter 2013, GEO expects AFFO to be in a range of
$0.72 to $0.75 per diluted share, or $52 million to $54 million. On a GAAP
basis, GEO expects its second quarter 2013 income from continuing operations
to be in a range of $0.38 to $0.40 per diluted share, including a one-time $3
million to $4 million after-tax loss associated with the write-off of deferred
financing fees in connection with GEO’s recently completed amendment to its
senior credit facility. GEO expects second quarter 2013 revenues to be in a
range of $380 million to $385 million.

Reconciliation Tables and Supplemental Disclosure

GEO has made available a Supplemental Disclosure which contains reconciliation
tables of operating income to net operating income, income from continuing
operations to pro forma income from continuing operations, income from
continuing operations to EBITDA and Adjusted EBITDA, and income from
continuing operations to Funds From Operations, Normalized Funds From
Operations and Adjusted Funds From Operations along with supplemental
financial and operational information on GEO’s business segments and other
important operating metrics. Please see the section of this press release
below entitled “Note to Reconciliation Tables and Supplemental Disclosure -
Important Information on GEO’s Non-GAAP Financial Measures” for information on
how GEO defines these supplemental 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 Disclosure which is available on GEO’s
Investor Relations webpage at www.geogroup.com.

GEO’s financial results are presented throughout as retrospectively revised
for discontinued operations resulting from the discontinuation of three
managed-only contracts with the State of Mississippi during the third quarter
of 2012 and the divestiture of the healthcare facility contracts previously
held by its former wholly-owned subsidiary, GEO Care, Inc., which was
completed on December 31, 2012.

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 2013 financial results
as well as its progress and outlook. The call-in number for the U.S. is
1-888-713-4199 and the international call-in number is 1-617-213-4861. The
conference call participant passcode is 53610700. 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.geogroup.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 June 8, 2013 at 1-888-286-8010 (U.S.) and 1-617-801-6888
(International). The conference call participant passcode for the telephonic
replay is 33063494.

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, and community reentry 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 95 facilities totaling approximately 72,000 beds with a growing
workforce of approximately 18,000 professionals.

Note to Reconciliation Tables and Supplemental Disclosure –
Important Information on GEO’s Non-GAAP Financial Measures

Net Operating Income, Pro Forma Income from Continuing Operations, EBITDA,
Adjusted EBITDA, Funds From Operations, Normalized Funds From Operations and
Adjusted Funds From Operations 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 and Adjusted Funds From Operations. 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 2013, 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, or gross profit, is defined as revenues less operating
expenses, excluding depreciation and amortization expense and general and
administrative expenses.

Pro Forma Income from Continuing Operations is defined as income from
continuing operations adjusted for net income/loss attributable to
non-controlling interests, start-up/transition expenses, net of tax,
international bid related costs, net of tax, and certain other adjustments as
defined from time to time. GEO believes that Pro Forma Income from Continuing
Operations is useful to investors as it provides information about the
performance of GEO’s overall business because such measure eliminates the
effects of certain charges that are not directly attributable to GEO’s
underlying operating performance, it provides disclosure on the same basis as
that used by GEO’s management and it provides consistency in GEO’s financial
reporting and therefore continuity to investors for comparability purposes.
GEO’s management uses Pro Forma Income from Continuing Operations to monitor
and evaluate its operating performance and to facilitate internal and external
comparisons of the historical operating performance of GEO and its business
units.

EBITDA is defined as income from continuing operations before net interest
expense, income tax provision (benefit), depreciation and amortization, and
tax provision on equity in earnings of affiliates. Adjusted EBITDA is defined
as EBITDA adjusted for net income/loss attributable to non-controlling
interests, non-cash stock-based compensation expenses, and certain other
adjustments as defined from time to time. GEO believes that Adjusted EBITDA is
useful to investors as it provides information about the performance of GEO’s
overall business because such measure eliminates the effects of certain
charges that are not directly attributable to GEO’s underlying operating
performance, it provides disclosure on the same basis as that used by GEO’s
management and it provides consistency in GEO’s financial reporting and
therefore continuity to investors for comparability purposes. GEO uses
Adjusted EBITDA to monitor and evaluate its operating performance and to
facilitate internal and external comparisons of the historical operating
performance of GEO and its business units.

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 the Company’s actual operating performance.

Adjusted Funds From Operations, or AFFO, is defined as Normalized Funds From
Operations adjusted for non-real estate related depreciation and amortization
expense, maintenance capital expenditures, non-cash stock-based compensation
expenses, non-cash interest expense, and certain other adjustments as defined
from time to time. GEO believes that Funds From Operations, Normalized Funds
From Operations, and Adjusted Funds From Operations are useful measures to
investors as they provide information regarding cash that GEO’s operating
business generates before taking into account certain cash and non-cash items
that are non-operational in nature, provide disclosure on the same basis as
that used by GEO’s management and provide consistency in GEO’s financial
reporting and therefore continuity to investors for comparability purposes.
GEO’s management uses these measures to monitor and evaluate its operating
performance and to facilitate internal and external comparisons of the
historical operating performance of GEO and its business units.

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 second quarter 2013 and full year 2013 and statements regarding
the anticipated closing of the acquisition of the Joe Corley Detention Center.
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 2013
given the various risks to which its business is exposed; (2) GEO’s ability to
consummate the acquisition of the Joe Corley Detention Center within its
anticipated timing, or at all; (3) GEO’s ability to declare future quarterly
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) GEO’s ability to remain qualified as a REIT; (12) the incurrence
of REIT related expenses; and (13) other factors contained in GEO’s Securities
and Exchange Commission periodic filings, including the Form 10-K, 10-Q and
8-K reports.

First quarter 2013 financial tables to follow:


Condensed Consolidated Statements of Income
                                                             
(In thousands except per share data)
(Unaudited)                                      Three Months     Three Months
                                                 Ended            Ended
                                                 31-Mar-13        1-Apr-12
Revenues                                         $  377,031       $  360,042
Operating expenses                                  280,797          270,720
Depreciation and amortization                       22,935           22,239
General and administrative expenses                32,040         26,586  
Operating income                                 $  41,259        $  40,497
Interest income                                     1,184            1,807
Interest expense                                   (19,341 )       (20,806 )
Income before income taxes, equity
in earnings of affiliates and                    $  23,102        $  21,498
discontinued operations
Provision for income taxes                          881              8,490
Equity in earnings of affiliates,                  1,217          748     
net of income tax provision
Income from continuing operations                $  23,438        $  13,756
Income from discontinued operations,               -              1,303   
net of income tax provision
Net income                                       $  23,438        $  15,059
Net income attributable to                         (18     )       (34     )
non-controlling interests
Net income attributable to The GEO               $  23,420       $  15,025  
Group, Inc.
                                                                  
Weighted average shares outstanding
                                     Basic          70,850           60,768
                                     Diluted        71,412           60,929
                                                                  
Income per share from continuing
operations
                                     Basic       $  0.33          $  0.23
                                     Diluted     $  0.33          $  0.23
                                                                  
                                                                  
Income per share attributable to The
GEO Group, Inc.
                                     Basic       $  0.33          $  0.25
                                     Diluted     $  0.33          $  0.25

                                                              
Condensed Consolidated Balance Sheets
                                                                   
(In thousands)
(Unaudited)
                                                                   
ASSETS                                             31-Mar-13       31-Dec-12
Current Assets
Cash and cash equivalents                          $ 83,724        $ 31,755
Restricted cash and investments                      15,780          15,654
Accounts receivable, less allowance for              254,917         246,635
doubtful accounts
Current deferred income tax assets                   18,290          18,290
Prepaid expenses and other current assets           25,649         24,849
Total current assets                                398,360        337,183
Restricted Cash and Investments                      30,337          32,756
Property and Equipment, Net                          1,680,165       1,687,159
Assets Held for Sale                                 1,700           3,243
Direct Finance Lease Receivable                      25,010          26,757
Non-Current Deferred Income Tax Assets               2,532           2,532
Goodwill                                             490,312         490,308
Intangible Assets, Net                               174,473         178,318
Other Non-Current Assets                            85,193         80,938
                                                   $ 2,888,082     $ 2,839,194
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable                                     52,152          50,110
Accrued payroll and related taxes                    46,316          39,322
Accrued expenses                                     112,175         116,557
Current portion of capital lease obligation,        59,627         53,882
long-term debt, and non-recourse debt
Total current liabilities                           270,270        259,871
                                                                   
Non-Current Deferred Income Tax Liabilities          15,703          15,703
Other Non-Current Liabilities                        82,522          82,025
Capital Lease Obligations                            11,678          11,926
Long-Term Debt                                       1,370,167       1,317,529
Non-Recourse Debt                                    97,964          104,836
Total Shareholders' Equity                          1,039,778      1,047,304
Total Liabilities and Shareholders' Equity         $ 2,888,082     $ 2,839,194


Reconciliation of Income from Continuing Operations to Funds from Operations,
Normalized FFO, and Adjusted Funds from Operations
                                                       
(In thousands)
(Unaudited)                          Three Months             Three Months
                                     Ended                    Ended
                                     31-Mar-13                1-Apr-12
Income from Continuing               $   23,438               $   13,756
Operations
Net Income Attributable to               (18      )               (34      )
Non-controlling Interests
Real Estate Related
Depreciation and                        12,524                 12,315   
Amortization
Funds from Operations                $   35,944              $   26,037   
                                                              
Funds from Operations                $   35,944               $   26,037
REIT Conversion Related                 3,667                  -        
Expenses
Normalized Funds from                $   39,611              $   26,037   
Operations
                                                              
Normalized Funds from                $   39,611               $   26,037
Operations
Non-Real Estate Related                  10,411                   9,924
Depreciation & Amortization
Consolidated Maintenance                 (3,617   )               (5,302   )
Capital Expenditures
Stock Based Compensation                 1,685                    1,472
Expenses
Amortization of Debt Costs              1,537                  690      
and Other Non-Cash Interest
Adjusted Funds from                  $   49,627              $   32,821   
Operations (AFFO)
                                                             
Normalized FFO Per Diluted           $   0.55                $   0.43     
Share
                                                             
AFFO Per Diluted Share               $   0.69                $   0.54     
                                                              
Weighted Average Common                  71,412                   60,929
Shares Outstanding-Diluted


Reconciliation of Operating Income to Net Operating Income
                                                    
(In thousands)
(Unaudited)                             Three Months     Three Months
                                        Ended            Ended
                                        31-Mar-13        1-Apr-12
Operating Income                        $   41,259       $   40,497
Depreciation and amortization               22,935           22,239
General and administrative expenses        32,040          26,586
Net Operating Income                    $   96,234       $   89,322

                                                             
Reconciliation of Income from Continuing Operations to Adjusted EBITDA
                                                                  
(In thousands)
(Unaudited)                                      Three Months     Three Months
                                                 Ended            Ended
                                                 31-Mar-13        1-Apr-12
Income from continuing operations                $  23,438        $  13,756
Interest expense, net                               18,157           18,999
Income tax provision                                881              8,490
Depreciation and amortization                       22,935           22,239
Tax provision on equity in earnings of             477            321     
affiliates
EBITDA                                           $  65,888        $  63,805
                                                                  
Adjustments
Net Income attributable to non-controlling          (18     )        (34     )
interests
Stock based compensation expenses, pre-tax          1,685            1,472
Start-up/transition expenses, pre-tax               -                4,889
International bid related costs, pre-tax            -                565
REIT conversion related expenses, pre-tax           5,972            -
M&A related expenses, pre-tax                      -              453     
Adjusted EBITDA                                  $  73,527       $  71,150  


Reconciliation of Income from Continuing Operations to Pro Forma Income from
Continuing Operations
                                                             
(In thousands except per share data)
(Unaudited)                                      Three Months     Three Months
                                                 Ended            Ended
                                                 31-Mar-13        1-Apr-12
Income from continuing operations                $  23,438        $  13,756
Net Income attributable to non-controlling          (18     )        (34     )
interests
Start-up/transition expenses, net of tax            -                3,055
International bid related costs, net of tax         -                418
REIT conversion related expenses, net of tax        3,667            -
M&A related expenses, net of tax                   -              273     
Pro forma income from continuing operations      $  27,087       $  17,468  
                                                                  
Income from continuing operations per            $  0.33          $  0.23
diluted share ^(1)
Net Income attributable to non-controlling          -                -
interests
Start-up/transition expenses, net of tax            -                0.05
International bid related costs, net of tax         -                0.01
REIT conversion related expenses, net of tax        0.05             -
M&A related expenses, net of tax                   -              -       
Diluted Pro forma income from continuing         $  0.38         $  0.29    
operations per diluted share
                                                                  
Weighted average common shares                      71,412           60,929
outstanding-diluted
                                                                  
                                                                  
(1) Note that earnings per share tables may contain slight summation
differences due to rounding

                                                               
2013 Outlook/Reconciliation                                   
  
(Unaudited)
(In thousands except per share data)
                                                                   
                                                  Full Year 2013
                                                                   
      Net Income                                  $ 112,000   to   $ 122,000
      Real Estate Related Depreciation and         50,000         50,000  
      Amortization
      Funds from Operations (FFO)                 $ 162,000  to   $ 172,000 
                                                                   
      REIT Conversion Related Expenses &           8,000          8,000   
      Write-Off of Deferred Financing Fees
      Normalized Funds from Operations            $ 170,000  to   $ 180,000 
                                                                   
      Non-Real Estate Related Depreciation          45,000           45,000
      and Amortization
      Consolidated Maintenance Capex                (30,000 )        (30,000 )
                                                                             
      Non-Cash Stock Based Compensation and        15,000         15,000  
      Non-Cash Interest Expense
      Adjusted Funds From Operations (AFFO)       $ 200,000  to   $ 210,000 
                                                                   
      Net Cash Interest Expense                     75,000           75,000
      Consolidated Maintenance Capex                30,000           30,000
      Income Taxes                                 15,000         15,000  
      Adjusted EBITDA                             $ 320,000  to   $ 330,000 
                                                                   
      G&A Expenses                                  100,000          100,000
      Non-Cash Stock Based Compensation            (10,000 )       (10,000 )
      Net Operating Income                        $ 410,000  to   $ 420,000 
                                                                   
      FFO Per Share                               $ 2.25      to   $ 2.39
      AFFO Per Share                              $ 2.78      to   $ 2.92
      Dividend Per Share                          $ 2.00           $ 2.00
      Weighted Average Common Shares                72,000           72,000
      Outstanding-Diluted
                                                                   
      FFO Payout Ratio                              89      %        84      %
      AFFO Payout Ratio                             72      %        69      %

Contact:

The GEO Group, Inc.
Pablo E. Paez, 866-301-4436
Vice President, Corporate Relations