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The GEO Group Reports First Quarter 2012 Results; Accelerates Dividend Policy To Third Quarter 2012 And Will Increase Cash Dividend In Fourth Quarter 2012

Adjusted Funds From Operations is defined as net income excluding depreciation and amortization, income tax provision, income taxes refunded/paid, stock-based compensation, maintenance capital expenditures, equity in earnings of affiliates, net of tax, amortization of debt costs and other non-cash interest, net income/loss attributable to non-controlling interests, start-up/transition expenses, M&A-related expenses, and international bid and proposal expenses. GEO believes that Adjusted Funds From Operations is useful to investors as it provides information regarding cash that GEO’s operating business generates before taking into account certain cash and non-cash items that are non-operational or infrequent in nature, 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 Adjusted Funds From 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.

GEO has made available a Supplemental Disclosure which contains reconciliation tables of pro forma net income to net income, Adjusted EBITDA to net income, Adjusted Funds from Operations to net income along with supplemental financial and operational information on GEO’s business segments. 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.

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 2012 and full year 2012, our expectation to declare quarterly cash dividends and the timing, amount and any future increase of such dividends, and our estimates regarding the timing of when the acquisition of 100% of the partnership interests in MCF will be accretive. 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 2012 given the various risks to which its business is exposed; (2) GEO’s ability to declare a quarterly cash dividend beginning in the third quarter 2012; (3) GEO’s ability to successfully pursue further growth and continue to create shareholder value; (4) GEO’s ability to consummate the acquisition of 100% of the partnership interests in MCF within the anticipated timeframe; (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) any difficulties encountered in maintaining relationships with customers, employees or suppliers as a result of the transactions with Cornell and BI; (11) GEO’s ability to access the capital markets in the future on satisfactory terms or at all; and (12) other factors contained in GEO’s Securities and Exchange Commission filings, including the Form 10-K, 10-Q and 8-K reports.

First quarter 2012 financial tables to follow:
   

THE GEO GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTEEN WEEKS ENDED APRIL 1, 2012 AND APRIL 3, 2011 (In thousands, except per share data) (UNAUDITED)
 
Thirteen Weeks Ended
April 1, 2012     April 3, 2011
Revenues $ 412,342 $ 391,766
Operating expenses 319,128 299,286
Depreciation and amortization 23,215 18,802
General and administrative expenses 27,441   32,788  
Operating income 42,558 40,890
Interest income 1,807 1,569
Interest expense (20,807 ) (16,961 )
Income before income taxes and equity in earnings of affiliates 23,558 25,498
Provision for income taxes 9,247 9,780
Equity in earnings of affiliates, net of income tax provision of $321 and $1,024 748   662  
Net income 15,059 16,380
Net (income) loss attributable to noncontrolling interests (34 ) 410  
Net income attributable to The GEO Group, Inc. $ 15,025   $ 16,790  
Weighted-average common shares outstanding:
Basic 60,768   64,291  
Diluted 60,929   64,731  
Income per Common Share Attributable to The GEO Group, Inc. — Basic $ 0.25   $ 0.26  
Income per Common Share Attributable to The GEO Group, Inc. — Diluted $ 0.25   $ 0.26  
       

THE GEO GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS APRIL 1, 2012 AND JANUARY 1, 2012 (In thousands, except share data)
 
April 1, 2012 January 1, 2012
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 48,999 $ 44,753
Restricted cash and investments (including VIEs 1 of $29,373 and $35,435, respectively) 38,398 42,535
Accounts receivable, less allowance for doubtful accounts of $2,829 and $2,453 282,902 292,783
Deferred income tax assets, net 28,726 28,726
Prepaid expenses and other current assets 31,380   50,532
Total current assets 430,405   459,329
Restricted Cash and Investments (including VIEs of $33,624 and $38,930, respectively) 61,379 57,912
Property and Equipment, Net (including VIEs of $161,440 and $162,665, respectively) 1,717,091 1,706,171
Assets Held for Sale 5,505 4,363
Direct Finance Lease Receivable 31,077 32,146
Deferred Income Tax Assets, Net 1,711 1,711
Goodwill 508,076 508,066
Intangible Assets, Net 195,652 200,342
Other Non-Current Assets 83,322   79,576
Total Assets $ 3,034,218   $ 3,049,616
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable $ 55,830 $ 69,653
Accrued payroll and related taxes 48,660 38,642
Accrued expenses 111,984 126,857
Current portion of capital lease obligations, long-term debt and non-recourse debt (including VIEs of $21,000 and $20,770, respectively) 56,020   53,666
Total current liabilities 272,494   288,818
Deferred Income Tax Liabilities 125,209 125,209
Other Non-Current Liabilities 59,142 56,381
Capital Lease Obligations 12,719 13,087
Long-Term Debt 1,312,832 1,319,068
Non-Recourse Debt (including VIEs of $102,442 and $108,335, respectively) 201,653 208,532
Total Shareholders’ Equity 1,050,169   1,038,521
Total Liabilities and Shareholders’ Equity $ 3,034,218   $ 3,049,616
 

1 Variable interest entities or “VIEs”
 

Reconciliation Tables for First Quarter 2012
       

Reconciliation of Pro Forma Net Income to Net Income
(In thousands except per share data)
  13 Weeks 13 Weeks
Ended Ended
1-Apr-12 3-Apr-11
Net Income $ 15,059 $ 16,380
Net (Income) loss attributable to non-controlling interests (34 ) 410
Start-up/transition expenses, net of tax 3,055 2,189
International bid and proposal expenses, net of tax 418 -
M&A Related Expenses, net of tax   273     3,735
Pro forma net income $ 18,771   $ 22,714
 
Diluted earnings per share $ 0.25 $ 0.25
Net (Income) loss attributable to non-controlling interests - 0.01
Start-up/transition expenses, net of tax 0.05 0.03
International bid and proposal expenses, net of tax 0.01 -
M&A Related Expenses, net of tax   -     0.06
Diluted pro forma earnings per share $ 0.31   $ 0.35
 
Weighted average common shares outstanding-diluted 60,929 64,731
       

Reconciliation from Adjusted EBITDA to Net Income
(In thousands)
  13 Weeks 13 Weeks
Ended Ended
1-Apr-12 3-Apr-11
Net Income $ 15,059 $ 16,380
Interest expense, net 19,000 15,392
Income tax provision 9,247 9,780
Depreciation and amortization 23,215 18,802
Tax provision on equity in earnings of affiliate   321     1,024
EBITDA $ 66,842 $ 61,378
 
Adjustments
Net (Income) loss attributable to non-controlling interests $ (34 ) $ 410
Start-up/transition expenses, pre-tax 4,889 3,567
Stock-Based Compensation, pre-tax 1,506 2,061
International bid and proposal expenses, pre-tax 565 -
M&A Related Expenses, pre-tax   453     5,657
Adjusted EBITDA $ 74,221   $ 73,073
       

Reconciliation of Adjusted Funds from Operations to Net Income
(In thousands)
  13 Weeks 13 Weeks
Ended Ended
1-Apr-12 3-Apr-11
Net Income $ 15,059 $ 16,380
Net (Income) loss attributable to non-controlling interests (34 ) 410
Depreciation and Amortization 23,215 18,802
Income Tax Provision 9,247 9,780
Income Taxes Refunded (Paid) 9,331 (940 )
Stock-Based Compensation 1,506 2,061
Maintenance Capital Expenditures (6,122 ) (8,319 )
Equity in Earnings of Affiliates, Net of Income Tax (748 ) (662 )
Amortization of Debt Costs and Other Non-Cash Interest 690 226
Start-up/Transition Expenses 4,889 3,567
M&A Related Expenses 453 5,657
International Bid and Proposal Expenses   565     -  
Adjusted Funds from Operations $ 58,051   $ 46,962  
   
Adjusted Funds from Operations Per Diluted Share $ 0.95   $ 0.73  
 
Weighted average common shares outstanding-diluted 60,929 64,731

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