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The GEO Group Inc. Reports Operating Results (10-K)

March 01, 2012 | About:
10qk

10qk

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The GEO Group Inc. (GEO) filed Annual Report for the period ended 2012-01-01.

Geo Grp Inc/the has a market cap of $1.08 billion; its shares were traded at around $17.61 with a P/E ratio of 11.2 and P/S ratio of 0.7. Geo Grp Inc/the had an annual average earning growth of 20.8% over the past 10 years.

Highlight of Business Operations:

The increase in revenues for U.S. Corrections & Detention in 2011 compared to 2010 is due to several factors including primarily: (i) aggregate increases in revenues of $30.5 million from Blackwater River Correctional Facility (Blackwater River) located in Milton, Florida which we completed the construction and began intake of inmates in October 2010, Indiana Short Term Offender Program (STOP) in Plainfield, Indiana which began operations in March 2011, and Adelanto Processing Center East (Adelanto East) which began operations in August 2011; (ii) an increase of revenue of $43.1 million due to the October 2010 activation of D. Ray James Correctional Facility (D. Ray James) located in Folkston, Georgia; (iii) aggregate increases of $9.4 million at Maverick County Detention Facility (Maverick) located in Maverick, Texas, LaSalle Detention Facility (LaSalle) located in Jena, Louisiana and Val Verde Correctional Facility (Val Verde) located in Del Rio, Texas due to increases in population; (iv) aggregate increases of $6.9 million due to population increases and/ or changes in contractual rates at Western Region Detention Facility (Western Region) located in San Diego, California, Aurora ICE Processing Center (Aurora) located in Aurora, Colorado and South Texas Detention Complex (STDC) located in Pearsall, Texas; (v) an increase of $2.4 million in revenues due to the opening of North Lake Correctional Facility (North Lake) locate in Baldwin, Michigan which began operations in May 2011 and was terminated effective October 2011; and (vi) aggregate net increases due to a full year of operations at other facilities acquired from Cornell of $86.6 million. These increases were partially offset by aggregate decreases of $46.8 million due to our terminated contracts.

The increase in revenues for GEO Care in 2011 compared to 2010 is attributable to several factors: (i) increases in revenue of $10.4 million due to the opening of the 100-bed Montgomery County Mental Health Treatment Facility (Montgomery County) located in Conroe, Texas in March 2011; (ii) aggregate net increases of $93.1 million due to the facilities acquired from Cornell in August 2010; and (iii) an increase in revenues due to our acquisition of BI for monitoring services, which contributed an increase of $86.9 million, and for services provided at our Day Reporting Centers, which contributed $26.3 million in additional revenues. These increases were partially offset by a decrease of $3.4 million due to the termination of our management contract at Brooklyn Community Re-entry Center in July 2011.

The increase in revenues for U.S. Corrections & Detention in 2010 compared to 2009 is primarily due to the acquisition of Cornell in August 2010 which contributed additional revenues of $85.5 million. Increases at other facilities in 2010 included: (i) $7.2 million from Blackwater River Correctional Facility located in Milton, Florida which we completed the construction and began intake of inmates in October 2010; and (ii) an aggregate increase of $13.3 million due to pre diem rate increases and increases in population. These increases were offset by: (i) an aggregate decrease of $9.1 million due to modest per diem reductions and lower populations at certain facilities; (ii) an aggregate decrease of $29.7 million due to our terminated contracts at the McFarland Community Correctional Facility (McFarland) in McFarland, California, Moore Haven Correctional Facility (Moore Haven) in Moore Haven, Florida, the Jefferson County Downtown Jail (Jefferson County) in Beaumont, Texas, Newton County Correctional Center (Newton County) in Newton, Texas, Graceville Correctional Facility (Graceville) in Graceville, Florida, South Texas Intermediate Sanction Facility (South Texas ISF) in Houston, Texas and Bridgeport Correctional Center (Bridgeport) in Bridgeport, Texas.

As of January 1, 2012, we have four interest rate swap agreements (the Agreements) in the aggregate notional amount of $100.0 million. We have designated these interest rate swaps as hedges against changes in the fair value of a designated portion of the 7 3/4% Senior Notes due to changes in underlying interest rates. These interest rate swaps, which have payment, expiration dates and call provisions that mirror the terms of the 7 3/4% Senior Notes, effectively convert $100.0 million of the 7 3/4% Senior Notes into variable rate obligations. Each of the swaps has a termination clause that gives the counterparty the right to terminate the interest rate swaps at fair market value, under certain circumstances. In addition to the termination clause, the Agreements also have call provisions which specify that the lender can elect to settle the swap for the call option price. Under these interest rate swaps, we receive a fixed interest rate payment from the financial counterparties to the agreements equal to 7 3/4% per year calculated on the notional $100.0 million amount, while we make a variable interest rate payment to the same counterparties equal to the three-month LIBOR plus a fixed margin of between 4.16% and 4.29%, also calculated on the notional $100.0 million amount. Changes in the fair value of the interest rate swaps are recorded in earnings along with related designated changes in the value of the 7 3/4% Senior Notes. Total net gains (loss), entirely offset by a corresponding increase (decrease) in the fair value of the variable rate portion of the 7 3/4% Senior Notes, recognized and recorded in earnings related to these fair value hedges was $4.1 million, $5.2 million and $(1.9) million in the fiscal periods ended January 1, 2012, January 2, 2011 and January 3, 2010, respectively. As of January 1, 2012 and January 2, 2011, the fair value of the swap assets was $7.4 million and

Our Australian subsidiary is a party to an interest rate swap agreement to fix the interest rate on the variable rate non-recourse debt to 9.7%. We have determined the swap, which has a notional amount of $50.9 million, payment and expiration dates, and call provisions that coincide with the terms of the nonrecourse debt, to be an effective cash flow hedge. Accordingly, we record the change in the value of the interest rate swap in accumulated other comprehensive income, net of applicable income taxes. Total unrealized gain (loss), net of tax, recognized in the fiscal years ended January 1, 2012, January 2, 2011 and January 3, 2010 and recorded in accumulated other comprehensive income (loss), net of tax, related to this cash flow hedge was $(1.2) million, $(0.1) million, and $1.2 million, respectively. The total value of the swap asset as of January 1, 2012 and January 2, 2011 was $0.0 million and $1.8 million, respectively, and is recorded as a component of other assets within the accompanying consolidated balance sheets. There was no ineffectiveness of this interest rate swap for the fiscal years presented. We do not expect to enter into any transactions during the next twelve months which would result in the reclassification into earnings or losses associated with this swap currently reported in accumulated other comprehensive income (loss).

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