The GEO (US:GEO)2020-08-06 20:50Financial Performance - Consolidated revenues for the six months ended June 30, 2020, were $1,192.8 million, a decrease from $1,224.6 million in the same period of 2019, reflecting a decline of approximately 2.6%[129] - Total revenues for Q2 2020 were $587.8 million, a decrease of 4.3% from $614.0 million in Q2 2019[143] - Total revenues for the first half of 2020 were $1,192,846,000, a decrease of 2.6% from $1,224,633,000 in the first half of 2019[164] - GEO Secure Services revenue decreased by $9.8 million, primarily due to contract terminations and a net decrease of 15.3 million in population at processing centers[144] - GEO Care revenue decreased by $17.3 million, mainly due to contract terminations and a reduction in client counts under ISAP services[146] - International Services revenue decreased by $1.1 million, with a $3.2 million increase from favorable performance offset by a $4.3 million decrease from foreign exchange rate fluctuations[147] - Net income attributable to the company for the three months ended June 30, 2020, was $36.7 million, down from $41.9 million in the same period in 2019[229] - Normalized Funds From Operations (FFO) for the six months ended June 30, 2020, was $108.7 million, compared to $126.9 million for the same period in 2019[229] - Adjusted Funds from Operations (AFFO) for the six months ended June 30, 2020, was $145.4 million, down from $163.7 million in the same period in 2019[229] Operational Metrics - The average company-wide facility occupancy rate was 88.4% for the six months ended June 30, 2020, down from 93.3% in the same period of 2019, primarily due to the impact of the COVID-19 pandemic[129] - Average occupancy in GEO Secure Services facilities was 89.2% in Q2 2020, down from 96.2% in Q2 2019[145] - The average occupancy in GEO Secure Services facilities was 90.5% in the first half of 2020, down from 95.8% in the first half of 2019[168] - Operating expenses represented 76.0% of consolidated revenues during the six months ended June 30, 2020, compared to 74.3% in the same period of 2019[246] - Labor and related costs accounted for 58.2% of operating expenses during the six months ended June 30, 2020[246] - General and administrative expenses rose to $99,325,000 (8.3% of revenue) in the first half of 2020, up from $93,695,000 (6.9%) in 2019, a 6.0% increase[181] COVID-19 Impact - The company is closely monitoring the impact of the COVID-19 pandemic on its operations, with significant disruptions noted during the six months ended June 30, 2020[136] - The company expects an estimated revenue decline of approximately 9% in 2020 due to negative impacts from the COVID-19 pandemic on its secure services business[238] - The reentry services business anticipates a revenue decline of approximately 10% in 2020 due to lower levels of referrals by federal, state, and local agencies[238] - The company will continue to evaluate its financial position in light of future developments related to COVID-19[207] Capital and Debt Management - The company has approximately $67 million in active capital projects, with $38 million spent through June 30, 2020, and an estimated remaining capital requirement of $29 million[188] - As of June 30, 2020, the company had $774 million in term loan borrowings, $491.7 million under the revolver, and $61.7 million in letters of credit, leaving $344.6 million in additional borrowing capacity[191] - The company expects to pay a quarterly dividend of $0.34 per share starting October 2020, which would annualize to $1.36 per share, allowing for $100 million in debt repayment this year[202][203] - The company incurred a loss of $1.2 million on extinguishment of debt due to the amendment of its Credit Agreement[189] - The weighted average interest rate on outstanding borrowings under the Credit Agreement as of June 30, 2020, was 2.63%[191] - The company repurchased approximately $5.5 million in its 5.125% Senior Notes due 2023 at a weighted average price of 70.68%, resulting in a net gain of $1.6 million on extinguishment of debt[198] - The company is subject to a requirement to distribute at least 90% of its taxable income to maintain REIT qualification, impacting its cash flow management[206] - The company plans to fund all capital needs, including REIT taxable income distributions and capital expenditures, from cash on hand, cash from operations, and borrowings under a $900.0 million Revolver[207] Future Projects and Contracts - A contract with U.S. Immigration and Customs Enforcement (ICE) was signed for case management and supervision services, expected to serve 90,000 to 100,000 participants daily over a five-year term starting April 1, 2020[137] - The company successfully rebid the operation of the 1,840-bed South Texas ICE Processing Center, effective August 6, 2020, with a ten-year term including renewal options[138] - Facility construction and design services related to an expansion project in Australia are expected to be completed in Q3 2020[148] - The company is developing a 489-bed expansion at the Junee Correctional Centre in Australia, expected to be completed in Q3 2020[244] - A ten-year contract renewal for secure transportation under the GEOAmey joint venture in the UK is expected to generate approximately $760 million in total revenue[244] - The company is negotiating to increase the capacity at the Ravenhall Correctional Centre in Australia by an additional 300 beds, which is expected to generate incremental annualized revenues of approximately $19 million[244] - The company plans to actively bid on new projects that fit its target profile for profitability and operational risk[239] Cash Flow and Investments - Cash, cash equivalents, and restricted cash as of June 30, 2020, were $106.7 million, an increase from $79.6 million as of June 30, 2019[217] - Cash provided by operating activities for the six months ended June 30, 2020, was $256.8 million, compared to $217.1 million for the same period in 2019, reflecting a positive impact from net income and changes in working capital[218] - Cash used in investing activities during the six months ended June 30, 2020, was $49.2 million, primarily due to capital expenditures of $53.5 million[220] - Cash used in financing activities during the six months ended June 30, 2020, was approximately $167.4 million, primarily due to dividends paid of $116.2 million and payments on long-term debt of $262.4 million[221] Market and Economic Sensitivity - For every 1% increase in the average interest rate applicable to the Credit Facility, the total annual interest expense would increase by approximately $13 million, based on borrowings of approximately $1,266 million[250] - A hypothetical 100 basis point increase or decrease in market interest rates would not have a material impact on the company's financial condition or results of operations[251] - Every 10% change in foreign currency exchange rates would have approximately a $5.5 million effect on the company's financial position and a $1.5 million impact on results of operations for the six months ended June 30, 2020[252]