The GEO Group Reports Second Quarter 2012 Results; Increases Quarterly Dividend To $0.20 Per Share

GEO has made available a Supplemental Disclosure which contains reconciliation tables of pro forma income from continuing operations to income from continuing operations, Adjusted EBITDA to income from continuing operations, Adjusted Funds from Operations to income from continuing operations 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 third quarter 2012, fourth quarter 2012, and full year 2012, our expectation to declare quarterly cash dividends and the timing and amount of such dividends, and our expectations regarding the acquisition of MCF, including the amendment of our senior credit facility, the redemption of the MCF bonds, the impact of the transaction, 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 future quarterly cash dividends; (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.

Second quarter and first six months 2012 financial tables to follow:

THE GEO GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTEEN AND TWENTY-SIX WEEKS ENDED JULY 1, 2012 AND JULY 3, 2011 (In thousands, except per share data) (Unaudited)
		Thirteen Weeks Ended								Twenty-six Weeks Ended
		July 1, 2012				July 3, 2011				July 1, 2012				July 3, 2011
Revenues		$	412,348			$	396,804			$	813,605			$	777,148
Operating expenses		305,035				299,236				613,295				588,257
Depreciation and amortization		23,807				20,945				46,882				39,646
General and administrative expenses		27,043				27,710				54,484				60,498
Operating income		56,463				48,913				98,944				88,747
Interest income		1,761				1,629				3,568				3,198
Interest expense		(20,617		)		(19,412		)		(41,424		)		(36,373		)
Income before income taxes, equity in earnings of affiliates and discontinued operations		37,607				31,130				61,088				55,572
Provision for income taxes		14,991				12,302				24,208				21,674
Equity in earnings of affiliates, net of income tax provision of $303, $563, $624 and $1,587, respectively		430				1,418				1,178				2,080
Income from continuing operations		23,046				20,246				38,058				35,978
Income (loss) from discontinued operations, net of tax provision (benefit) of $(359), $577, $(330) and $985, respectively		(570		)		917				(523		)		1,565
Net income		22,476				21,163				37,535				37,543
Net (income) loss attributable to noncontrolling interests		25				415				(9		)		825
Net income attributable to The GEO Group, Inc.		$	22,501			$	21,578			$	37,526			$	38,368
Weighted-average common shares outstanding:
Basic		60,839				64,455				60,803				64,373
Diluted		61,066				64,858				60,984				64,787
Income per Common Share Attributable to The GEO Group, Inc.(1):
Basic:
Income from continuing operations		$	0.38			$	0.32			$	0.63			$	0.57
Income (loss) from discontinued operations		(0.01		)		0.01				(0.01		)		0.02
Income per common share attributable to The GEO Group, Inc. - basic		$	0.37			$	0.33			$	0.62			$	0.60
Diluted:
Income from continuing operations		$	0.38			$	0.32			$	0.62			$	0.57
Income (loss) from discontinued operations		(0.01		)		0.01				(0.01		)		0.02
Income per common share attributable to The GEO Group, Inc. - diluted		$	0.37			$	0.33			$	0.62			$	0.59
(1) Note that earnings per share tables may contain slight summation differences due to rounding.

CONSOLIDATED BALANCE SHEETS JULY 1, 2012 AND JANUARY 1, 2012 (In thousands, except share data)
		July 1, 2012				January 1, 2012
		(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents		$	68,538			$	44,753
Restricted cash and investment (including VIEs 1 of $29,373 and $35,435, respectively)		40,071				42,535
Accounts receivable, less allowance for doubtful accounts of $2,779 and $2,453, respectively		284,431				285,810
Deferred income tax assets, net		28,726				28,726
Prepaid expenses and other current assets		23,383				50,346
Current assets of discontinued operations		6,713				7,159
Total current assets		451,862				459,329
Restricted Cash and Investments (including VIEs of $41,270 and $38,930, respectively)		60,070				57,912
Property and Equipment, Net (including VIEs of $160,284 and $162,665, respectively)		1,718,392				1,705,306
Assets Held for Sale		5,390				4,363
Direct Finance Lease Receivable		29,253				32,146
Deferred Income Tax Assets, Net		1,711				1,711
Goodwill		508,068				508,066
Intangible Assets, Net		190,743				200,342
Other Non-Current Assets		83,163				79,576
Non-Current Assets of Discontinued Operations		576				865
Total Assets		$	3,049,228			$	3,049,616
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable		$	63,681			$	69,632
Accrued payroll and related taxes		37,209				38,130
Accrued expenses		121,604				126,682
Current portion of capital lease obligations, long-term debt and non-recourse debt (including VIEs of $21,000 and $20,770, respectively)		59,758				53,666
Current liabilities of discontinued operations		702				708
Total current liabilities		282,954				288,818
Deferred Income Tax Liabilities		125,209				125,209
Other Non-Current Liabilities		58,938				56,381
Capital Lease Obligations		12,456				13,087
Long-Term Debt		1,298,030				1,319,068
Non-Recourse Debt (including VIEs of $101,730 and $108,335, respectively)		198,995				208,532
Total shareholders’ equity		1,072,646				1,038,521
Total Liabilities and Shareholders’ Equity		$	3,049,228			$	3,049,616
1 Variable interest entities or “VIEs”

Reconciliation Tables for Second Quarter and First Six Months 2012

Reconciliation of Pro Forma Income from Continuing Operations to Income from Continuing Operations
(In thousands except per share data)
			13 Weeks			13 Weeks			26 Weeks				26 Weeks
			Ended			Ended			Ended				Ended
			1-Jul-12			3-Jul-11			1-Jul-12				3-Jul-11
Income from continuing operations			$	23,046		$	20,246		$	38,058			$	35,978
	Start-up/transition expenses, net of tax			1,084			3,348			4,139				5,537
	International bid and proposal expenses, net of tax			753			416			1,171				416
	Net loss (income) attributable to non-controlling interests			25			415			(9	)			825
	M&A related expenses, net of tax			209			394			482				4,129
Pro forma income from continuing operations			$	25,117		$	24,819		$	43,841			$	46,885
Diluted earnings per share from continuing operations (1)			$	0.38		$	0.31		$	0.62			$	0.56
	Start-up/transition expenses, net of tax			0.02			0.05			0.07				0.09
	International bid and proposal expenses, net of tax			0.01			0.01			0.02				0.01
	Net loss attributable to non-controlling interests			-			0.01			-				0.01
	M&A related expenses, net of tax			-			0.01			0.01				0.06
Diluted pro forma earnings per share from continuing operations			$	0.41		$	0.38		$	0.72			$	0.72
Weighted average common shares outstanding-diluted				61,066			64,858			60,984				64,787
(1) Note that earnings per share tables may contain slight summation differences due to rounding

Reconciliation from Adjusted EBITDA to Income from Continuing Operations
(In thousands)
			13 Weeks			13 Weeks			26 Weeks				26 Weeks
			Ended			Ended			Ended				Ended
			1-Jul-12			3-Jul-11			1-Jul-12				3-Jul-11
Income from continuing operations			$	23,046		$	20,246		$	38,058			$	35,978
	Interest expense, net			18,856			17,783			37,856				33,175
	Income tax provision			14,991			12,302			24,208				21,674
	Depreciation and amortization			23,807			20,945			46,882				39,646
	Tax provision on equity in earnings of affiliate			303			563			624				1,587
EBITDA			$	81,003		$	71,839		$	147,628			$	132,060
Adjustments
	Net loss (income) attributable to non-controlling interests		$	25		$	415		$	(9	)		$	825
	Stock based compensation expenses, pre-tax			1,988			1,537			3,494				3,598
	Start-up/transition expenses, pre-tax			1,535			4,996			6,424				8,563
	International bid and proposal expenses, pre-tax			1,050			645			1,615				645
	M&A related expenses, pre-tax			351			651			804				6,308
Adjusted EBITDA			$	85,952		$	80,083		$	159,956			$	151,999

Reconciliation of Adjusted Funds from Operations to Income from Continuing Operations
(In thousands)
			13 Weeks				13 Weeks				26 Weeks				26 Weeks
			Ended				Ended				Ended				Ended
			1-Jul-12				3-Jul-11				1-Jul-12				3-Jul-11
Income from continuing operations			$	23,046			$	20,246			$	38,058			$	35,978
	Net loss (income) attributable to non-controlling interests			25				415				(9	)			825
	Depreciation and Amortization			23,807				20,945				46,882				39,646
	Income Tax Provision			14,991				12,302				24,208				21,674
	Income Taxes (Paid) Refunded			(4,934	)			(7,794	)			4,397				(8,734	)
	Stock Based Compensation Expenses			1,988				1,537				3,494				3,598
	Maintenance Capital Expenditures			(8,090	)			(6,875	)			(14,212	)			(15,194	)
	Equity in Earnings of Affiliates, Net of Income Tax			(430	)			(1,418	)			(1,178	)			(2,080	)
	Tax provision on equity in earnings of affiliate			303				563				624				1,587
	Amortization of Debt Costs and Other Non-Cash Interest			679				415				1,369				641
	Start-up/transition expenses			1,535				4,996				6,424				8,563
	M&A Related Expenses			351				651				804				6,308
	International bid and proposal expenses			1,050				645				1,615				645
	Adjusted Funds from Operations		$	54,321			$	46,628			$	112,476			$	93,457
Adjusted Funds from Operations Per Share			$	0.89			$	0.72			$	1.84			$	1.44
Weighted average common shares outstanding-diluted				61,066				64,858				60,984				64,787

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