GEO Group Announces Change in Corporate Structure

BOCA RATON, Florida, December 02, 2021–(BUSINESS WIRE)–The GEO Group (NYSE:GEO) (“GEO”) today announced that its Board of Directors (the “Board”) has unanimously approved a plan to terminate its choice of Real Estate Investment Trust (“REIT”) and become a taxable C corporation, effective with the fiscal year ending December 31, 2021. The decision stems from the board’s assessment of GEO’s corporate tax structure and REIT status, which was announced on April 7, 2021.

The Board of Directors also voted unanimously to eliminate GEO’s quarterly dividend. The change in corporate status from a REIT to a taxable C corporation should give GEO additional flexibility to allocate free cash flow to reduce recourse net debt. GEO has made efforts to reduce net recourse debt over the past two years. In 2020, GEO reduced net recourse debt by approximately $100 million, and during the first three quarters of 2021, GEO reduced net recourse debt by an additional $175 million.

George C. Zoley, Executive Chairman of GEO, said, “The decision by our Board of Directors to terminate the REIT is consistent with the proactive and multifaceted approach we have taken to meet the future maturities of our debt, which includes our focus on net recourse debt reduction. and deleveraging, our review of potential sales of Company-owned assets and businesses, and our ongoing evaluation of capital structure alternatives with the assistance of our financial and legal advisors. We believe these are prudent measures, which are in the best interests of our shareholders and other stakeholders. Consistent with our objective of reducing net debt with recourse, we plan to allocate free cash flow to fund quality growth opportunities and potentially return capital to shareholders in the future.”

Updated 2021 guidelines

Following the restructuring of GEO into a taxable C corporation in fiscal year 2021, during the fourth quarter of 2021, GEO expects to incur a one-time, non-cash deferred tax charge of approximately $75 million. dollars. GEO also expects to incur approximately $34 million of additional tax expense in the fourth quarter of 2021 due to the resulting corporate tax rate increase for 2021, including a catch-up tax charge from ‘approximately $26 million related to the first three quarters of 2021.

Due to tax-related corporate restructuring items, GEO expects to report a net income loss attributable to GEO for the fourth quarter of 2021 of approximately $69 million. Excluding the one-time non-cash deferred tax charge and the portion of the incremental tax charge associated only with the first three quarters of 2021, GEO expects fourth quarter 2021 adjusted net income to be between 0, $29 and $0.31 per diluted share and fourth quarter 2021 AFFOs will be between $0.58 and $0.60 per diluted share, reflecting the higher quarterly tax rate that GEO expects pay as a taxable C corporation.

Due to tax-related corporate restructuring items, GEO expects full-year 2021 net income attributable to GEO to be in the range of $70 million to $72 million. Excluding the non-cash deferred tax expense, GEO expects full-year 2021 adjusted net income to be in the range of $1.14 to $1.16 per diluted share and AFFOs for 2021 are in the range of $2.30 to $2.32 per diluted share, reflecting the higher annual corporate tax rate that GEO expects to pay as a taxable C corporation. GEO confirmed its previously published Full Year 2021 Adjusted EBITDA guidance in the range of $451.5 million to $455 million.

About GEO Group

The GEO Group, Inc. (NYSE: GEO) is a leading diversified government service provider specializing in the design, financing, development and support services for secure facilities, processing centers and community reintegration centers in the United States, Australia and South Africa. , and the United Kingdom. GEO’s diverse services include enhanced incarceration rehabilitation and post-release support through the award-winning GEO Continuum of Care®, secure transportation, electronic monitoring, community programs, and correctional and mental health care. GEO’s global operations include ownership and/or provision of support services for 107 facilities totaling approximately 86,000 beds, including inactive facilities and projects under development, with a workforce of up to approximately 18,500 employees.

Safe Harbor Statement

This press release contains forward-looking statements regarding future events and GEO’s future performance that involve risks and uncertainties that could materially and adversely affect actual results, including statements regarding GEO’s expectations regarding the timing and the amount of the occurrence of -cash deferred tax expense and incremental income tax expense, financial guidance for the fourth quarter and full year of 2021, and GEO’s proposed actions to meet future debt maturities, including, but not limited to, its planned transition to a taxable C corporation, the end of its REIT choice, and the discontinuation of its quarterly dividend. Forward-looking statements can generally be identified by the use of forward-looking words such as “may”, “will”, “expect”, “anticipate”, “intend”, “plan”, “believe”. , “seek”, “estimate” or “continue” or the negative of these similar words and expressions. Risks and uncertainties that could cause actual results to differ from current expectations and the forward-looking statements contained in this press release include, but are not limited to: (1) GEO’s ability to meet its financial guidance for the fourth quarter and full year of 2021 given the various risks to which its business is exposed; (2) GEO’s ability to deleverage and repay, refinance or otherwise service its debt maturities in the amount or at the times it expects, or at all; (3) GEO’s ability to identify and complete any potential sale of additional Company-owned assets and businesses on commercially advantageous terms in a timely manner, or at all; (4) changes in federal and state government policy, orders, guidelines, legislation, and regulations that affect public-private partnerships with respect to secure correctional and detention facilities, treatment centers, and rehabilitation centers, including the timing and scope of implementation of President Biden’s Executive Order directing the United States Attorney General not to renew United States Department of Justice contracts with facilities detention for private criminals; (5) changes in federal immigration policy; (6) public and political opposition to the use of public-private partnerships with respect to the security of correctional and detention facilities, treatment centers and rehabilitation centers; (7) the magnitude, severity and duration of the current global COVID-19 pandemic, its impact on GEO, GEO’s ability to mitigate risks associated with COVID-19, and the effectiveness and distribution of COVID-19 vaccines; (8) GEO’s ability to maintain or improve its company-wide facility occupancy rates in light of the global COVID-19 pandemic and impacting policy and contract announcements on Federal GEO facilities in the United States; (9) fluctuations in our operating results, including as a result of contract terminations, contract renegotiations, changes in occupancy levels and increases in our operating costs; (10) general economic and market conditions, including changes in government budgets and their impact on new contract terms, contract renewals, renegotiations, daily rates, fixed payment arrangements and occupancy levels ; (11) GEO’s ability to open facilities on a timely basis as planned, cost-effectively manage such facilities and successfully integrate such facilities into GEO’s operations without substantial costs; (12) GEO’s ability to win management contracts for which it has submitted proposals and to maintain existing management contracts; (13) risks associated with GEO’s ability to control operating costs associated with contract start-ups; (14) GEO’s ability to successfully continue to grow, continue to create shareholder value and potentially return capital to shareholders in the future; (15) GEO’s ability to obtain financing or access capital markets in the future on acceptable terms or at all; (16) other factors contained in GEO’s periodic filings with the Securities and Exchange Commission, including its reports on Forms 10-K, 10-Q and 8-K, many of which are difficult to predict and beyond the GEO control.

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contacts

Pablo E. Paez (866) 301 4436
Executive Vice President, Corporate Relations