Attached files
| file | filename |
|---|---|
| EX-2.1 - EX-2.1 - GEO GROUP INC | d451366dex21.htm |
| EX-99.1 - EX-99.1 - GEO GROUP INC | d451366dex991.htm |
| 8-K - 8-K - GEO GROUP INC | d451366d8k.htm |
 Company Restructuring Toward
January 1, 2013 REIT Conversion
December 2012
Exhibit 99.2 |
 2
This presentation contains forward-looking statements regarding future events
and future performance of the Company 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 presentation include, but are not limited to: (1) GEO’s
ability to successfully
complete
the
conversion
to
a
real
estate
investment
trust
effective
January
1,
2013; (2) GEO’s ability to meet its financial guidance; (3) GEO’s ability
to declare future cash dividends; (4) GEO's ability to pursue further growth
and continue to enhance shareholder value; (5) GEO's ability to access the
capital markets in the future on satisfactory terms or at all; (6) risks
associated with GEO's ability to control operating costs associated with
contract start-ups; (7) GEO's ability to timely build and/or open facilities as
planned, profitably manage such facilities and successfully integrate such
facilities into GEO's
operations
without
substantial
costs;
(8)
GEO's
ability
to
win
management
contracts
for which it has submitted proposals and to retain existing management contracts;
(9) GEO's ability to obtain future financing at competitive rates; (10)
GEO's ability to sustain company-wide occupancy rates at its facilities;
and (11) other factors contained in GEO's Securities and Exchange Commission
filings, including the Forms 10-K, 10-Q and 8-K reports.
Forward-Looking Statements
Forward-Looking Statements |
 3
REIT Requirements
A REIT is an entity that:
Distributes annually at least 90% of its taxable income to
shareholders in the form of a dividend
Invests at least 75% of its total assets (Asset Test) in
qualifying real estate assets
Derives at least 75% of its gross income from real estate
related sources (75% Income Test) and at least 95% of
its gross income from real estate related sources,
dividends and interest (95% Income Test)
Is substantially restricted in its ability to directly or
indirectly operate or manage health care facilities |
 4
REIT Eligibility / Approval Process
July Filing with the IRS for Private Letter Ruling
Receipt of Expert Legal and Financial Advice Regarding
REIT Eligibility Requirements
Restructuring of Company Subsidiaries into Qualified REIT
Subsidiaries + Taxable REIT Subsidiaries
Divestiture of Health Care Facility Operations by
December 31, 2012: GEO Care
Historical Earnings and Profit Distribution
Final IRS Review and Approval
Receipt of final PLR from IRS not needed before
January 1, 2013 to operate in REIT compliance |
 5
REIT Announcement
GEO Board has unanimously approved all necessary steps to
position GEO to operate in compliance with REIT rules
beginning January 1, 2013
2013E Adjusted EBITDA of $320 to $330 million; AFFO of
$200-210 million; and FFO of $215-225 million
Estimated annual dividend of $2.20-2.40 per share
Special dividend of $350 million, or $5.68 per share, payable
in December 2012 (80% / 20% Stock / Cash Election)
One-time REIT-related costs/charges of $15-20 million offset
by elimination of net deferred tax liabilities resulting in positive
earnings adjustment of $90-110 million
Annual tax savings estimated at $45-50 million |
 6
Event Timeline
-
December 12, 2012
Record Date for Special
Dividend
-
December 31, 2012
Special Dividend Payment
Date
-
December 31, 2012
Complete Company
Reorganization; Asset
Divestiture
-
January 1, 2013
Begin Operating in
Compliance
with REIT Rules
-
First Half 2013
Shareholder Vote to
Approve REIT Ownership
Restrictions in the Charter |
 7
Significant Projected Benefits from REIT
Structure for GEO and its Shareholders
Increases Shareholder Value
Lowers Cost of Capital
Attracts Larger Base of Potential
Shareholders
Provides Greater Flexibility to Pursue
Growth Opportunities
Creates More Efficient Operating Structure |
 8
Diversified Government
Outsourcing Services Provider
Diversified Business Units
-
U.S. Corrections & Detention
-
Community Reentry
-
International Services
3 Federal Clients
11 State DOC Clients
6 International Clients
Presence in United States,
Australia, South Africa
and United Kingdom
73,000 beds
101 Facilities (94 U.S., 7 Int’l)
18,000 Employees
70,000 Offenders Monitored
Co-Leader in Corrections
& Detention
Largest in Community-Based
Services
Largest in Electronic Monitoring
Largest in Youth Services
REIT Structure Aligns with GEO’s
Diversified Business Segments |
 9
Fundamentally, GEO is in a real
estate intensive industry
GEO has financed and developed
dozens of facilities since the mid-
1980s
GEO owns/leases significant
portion of its correctional and
detention facilities
GEO has more than $1.7 billion in
long-term assets with minimum
targeted ROIC of 13-15%
Foundation of our Business is
Long-Term Corrections Assets |
 10
Significant Facility/Bed Ownership in U.S. Markets
GEO Controlled
66%
Gov’t Controlled
34%
GEO Controlled
82%
Gov’t Controlled
18%
Facility/Bed Ownership
Facility/Bed Ownership
Facility Level EBITDA
Facility Level EBITDA
* Charts exclude International Facilities, BI Electronic Monitoring and
Reentry Services & Health Care Operations Divestiture
Leased
10%
Managed Only
18%
Owned
72%
Leased
7%
Managed Only
34%
Owned
59% |
 11
Enhanced Shareholder Value Creation
•
Increased Dividends
Special Dividend of $350 Million in 2012
(80% / 20% Stock / Cash Election)
For 2013:
For Illustrative
Purposes Only
in Millions
(except per share data)
Pre-Tax Income
$130 -
$140
Current Shares Outstanding *
61.6
Dividends per Share *
$2.20 -
$2.40
* Based on GEO’s current outstanding share count of 61.6 million
|
 12
Lower Cost of Capital
•
More efficient REIT structure leads to greater access to
capital markets and lower cost of capital
•
Due to capital intensive nature of corrections/detention
business, new structure provides greater flexibility to
pursue growth opportunities
•
REIT structure allows GEO to pursue a range of
attractive ROIC opportunities |
 13
Potential to Expand Investor Base
•
REIT structure to draw a more diversified investor
base including active and passive REIT investors
•
GEO has attractive real estate characteristics and
business fundamentals
GEO
Stable, sustainable income
Diversified, investment grade government customer base
Solid occupancy rates
Strong customer retention (in excess of 90%)
Low maintenance capex requirements |
 14
New Company Structure |
 15
E&P Distribution in 4Q12
•
Special dividend of $350 million, $5.68 per share, to be
paid on December 31, 2012 to shareholders of record
as of December 12, 2012
80% / 20% Stock / Cash Election
Eligible for maximum individual dividend tax rate
of 15%
•
Shareholders who elect to receive all cash will be
placed in a lottery capped at approx. $7 million
•
Adequate liquidity to fund cash portion (approx. $77
million) of special dividend |
 16
REIT-Related Costs
•
One-time REIT-related costs estimated at $15-20
million including costs related to modifying existing debt
agreements
•
Offset by positive earnings adjustment of $90-110
million due to the elimination of certain net deferred tax
liabilities
•
Ongoing annual compliance costs of $3-5 million |
 17
Asset Divestiture
•
Due to REIT provisions in the tax code, GEO will need to divest
its health care facility operations by Dec. 31, 2012
Six managed-only hospitals (1,970 Beds) and two
Correctional Healthcare contracts
•
GEO Board has entered into agreement for Management
Buyout (MBO) of health care facility operations for $36 million,
plus up to $5 million in earn-out payments
•
MBO to pay $2.6 million in additional annual payments and
cost savings to GEO for support services and licensing for five
years
•
$13-17 million after-tax, non-cash write-off of goodwill, other
intangible assets, and intercompany debt in 4Q12
•
MBO provides certainty of closing and aligns with steps to
operate in compliance with REIT rules beginning on
January 1, 2013 |
 18
Growing Cash Flows to Support Increased Dividends
GEO AFFO has Grown at 17% CAGR since 2008
AFFO
Bridge
GEO 2012E
GEO 2013E
Status Quo
GEO 2013E *
REIT/TRS
Cash Taxes
$5-10 Million
$55-60 Million
$10-15 Million
AFFO
$210-220 Million
$160-170 Million
$200-210 Million
* Reflects Healthcare Divestiture and $3-5 Million in Compliance
Costs $93.9
$117.4
$132.2
$198.7
$215.0
$205.0
$0
$50
$100
$150
$200
$250
2008
2009
2010
2011
2012E
2013E |
 19
2013 REIT Guidance
Guidance
2013E
REIT/TRS
Adjusted EBITDA
$320
Million
-
$330
Million
FFO
$215
Million
-
$225
Million
AFFO
$200
Million
-
$210
Million
Pre-Tax Income
$130
Million
-
$140
Million
Dividend per Share *
$2.20
-
$2.40
•
REIT structure to drive increased dividend distribution
* Based on GEO’s current outstanding share count of 61.6 million
|
  20
Beds in Inventory
Facility
State
Beds
Prospective Clients
Great Plains Correctional Facility
OK
2,048
State & Federal
North Lake Correctional Facility
MI
1,740
State & Federal
Desert View CCF
CA
650
State, Federal & Local
Central Valley CCF
CA
640
State, Federal & Local
Leo Chesney CCF
CA
318
State, Federal & Local
Mesa Verde CCF
CA
400
State, Federal & Local
McFarland CCF
CA
260
State, Federal & Local
TOTAL
6,056
-
Carrying Costs for GEO’s Idle Facilities Equal $0.14 Per
Share -
Incremental EBITDA Potential = $30-35 Million
(Based on GEO’s Avg. Per Diem of $55 and Avg. Company-Owned
Margins) |
 21
Opportunity Pipeline
Faciliy
Location
Client
Ownership
Beds
Annual Ops
Revenues
Dev.
Capex
Opening
Date
Proposal
Pipeline
Beds
Riverbend CF
Ga.
GA DOC
Owned
1,500
=
$28M
$80M
Dec-11
Karnes Co. Civil Detention Facility
Tex.
ICE
Owned
600
=
$15M
$32M
Mar-12
New Castle CF Expansion
Ind.
IDOC
Managed
512
=
$8M
$23M
Mar-12
Adelanto ICE Processing Center Exp.
Calif.
ICE
Owned
650
=
$21M
$70M
Aug-12
Aurora USMS Contract
Col.
USMS
Owned
320
=
$8M
-
Oct-12
New Hampshire -
New Beds
NH
1,700
BOP CAR 14
U.S.
1,300
Florida Prison Bid
Fla.
3,854
Michigan Prison Beds
Mich.
1,750
Southwest Border Transportation
TX, AZ, NM, CA
N/A
TOTAL
3,582
=
$80M
$205M
8,604 |