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GEO Geo

May 18, 2017

VIA EDGAR

Mr. Eric McPhee

Senior Staff Accountant

Office of Real Estate and Commodities

United States Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549

 

 RE:The GEO Group, Inc.

Form 10-K for the fiscal year ended December 31, 2016

Filed on February 27, 2017

File No. 001-14260

Form 8-K

Filed February 28, 2017

File No. 001-14260

Dear Mr. McPhee:

On behalf of The GEO Group, Inc. (the “Company” or “GEO”), we hereby respond to the Staff’s comment letter, dated May 9, 2017, regarding the above referenced Form 10-K for the year ended December 31, 2016 filed on February 27, 2017 (the “Form 10-K”) and the Form 8-K filed on February 28, 2017 (the “Form 8-K”). Please note that, for the Staff’s convenience, we have recited the Staff’s comment in boldface type and provided our response to the comment immediately thereafter.

Form 10-K for the fiscal year ended December 31, 2016

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Funds from Operations, page 81

 

1.We note that certain adjustments to “NAREIT Defined FFO” and “Normalized Funds from Operations” have been presented net of tax. Please tell us how you considered the guidance in Question 102.11 of the updated Compliance and Disclosure Interpretations issued on May 17, 2016. This comment should also be applied to the presentation within your earnings release filed on Form 8-K and within the supplemental information posted on your website.

Response:

We acknowledge the Staff’s comment and we will revise the presentation and definition of FFO and Normalized FFO in future earnings releases, supplemental materials and periodic filings to be consistent with the proposed presentation attached hereto as Exhibit I.


Form 8-K filed February 28, 2017

Exhibit 99.1

 

2.We note your calculation of EBITDA contains adjustments for items other than interest, taxes, depreciation and amortization. Please revise in future filings to ensure that measures calculated differently from EBITDA are not characterized as EBITDA. See Question 103.01 of the updated Compliance and Disclosure Interpretations issued on May 17, 2016. This comment should also be applied to your presentation within the supplemental information posted on your website.

Response:

We acknowledge the Staff’s comment and we will revise the presentation and definition of EBITDA in future earnings releases and supplemental materials to be consistent with the proposed presentation attached hereto as Exhibit II.

 

3.In future filings, please revise to present a separate EBITDA reconciliation to comply with Item 10(e)(1)(i)(B) of Regulation S-K which requires a reconciliation of non-GAAP financial measures disclosed or released with the most directly comparable GAAP measure (i.e. net income). Further, your reconciliation should begin with the GAAP measure, so the non-GAAP measures do not receive undue prominence. See Question 102.10 of the updated Compliance and Disclosure Interpretations issued on May 17, 2016. This comment should also be applied to your presentation within the supplemental information posted on your website.

Response:

We acknowledge the Staff’s comment and we will revise the presentation of the EBITDA reconciliation in future earnings releases and supplemental materials to be consistent with the proposed presentation attached hereto as Exhibit II.

 

Sincerely,

AKERMAN LLP

/s/ Esther L. Moreno

Esther L. Moreno
For the Firm

 

cc:Securities and Exchange Commission

  Jeffrey Lewis, Staff Accountant

The GEO Group, Inc.

  Brian R. Evans, Senior Vice President and Chief Financial Officer

  John J. Bulfin, Esq., Senior Vice President and General Counsel

  Ronald A. Brack, Vice President, Chief Accounting Officer and Controller

Akerman LLP

  Stephen K. Roddenberry, Esq.

  Larry W. Ross II


Exhibit I

 

LOGO  

 

   Q4 2016  Q4 2015  FY 2016  FY 2015 

Net Income attributable to GEO

  $49,436  $44,058  $148,715  $139,438 

Add:

     

Real Estate Related Depreciation and Amortization

   15,482   14,933   61,179   57,758 

Gain on sale of real estate assets ***

   (952  —     (952  —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Equals: NAREIT defined FFO

  $63,966  $58,991  $208,942  $197,196 
  

 

 

  

 

 

  

 

 

  

 

 

 

Add:

     

Non-recurring tax benefits**

   (2,031  —     (2,031  —   

Loss on extinguishment of debt

   —     —     15,885   —   

Start-up expenses

   —     —     1,939   4,658 

M&A related expenses

   —     —     —     2,232 

Tax effect of adjustments to Funds From Operations ****

   —     —     (749  173 
  

 

 

  

 

 

  

 

 

  

 

 

 

Equals: FFO, normalized

  $61,935  $58,991  $223,986  $204,259 
  

 

 

  

 

 

  

 

 

  

 

 

 

Add:

     

Non-Real Estate Related Depreciation & Amortization

   13,548   13,196   53,737   48,998 

Consolidated Maintenance Capital Expenditures

   (4,699  (5,622  (23,419  (23,551

Stock Based Compensation Expenses

   3,098   3,107   12,773   11,709 

Amortization of debt issuance costs, discount and/or premium and othernon-cash interest

   3,791   1,977   12,121   6,963 
  

 

 

  

 

 

  

 

 

  

 

 

 

Equals: AFFO

  $77,673  $71,649  $279,198  $248,378 
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average common shares outstanding - Diluted

   74,460   74,059   74,323   73,995 

FFO/AFFO per Share - Diluted

     

Normalized FFO Per Diluted Share

  $0.83  $0.80  $3.01  $2.76 
  

 

 

  

 

 

  

 

 

  

 

 

 

AFFO Per Diluted Share

  $1.04  $0.97  $3.76  $3.36 
  

 

 

  

 

 

  

 

 

  

 

 

 

Regular Common Stock Dividends per common share

  $0.65  $0.65  $2.60  $2.51 
  

 

 

  

 

 

  

 

 

  

 

 

 

 

*all figures in ‘000s, except per share data
**adjusmtent to tax provision
***no tax impact
****tax adjustments relate tostart-up expenses and M&A expenses


Exhibit II

 

LOGO  

 

   Q4 2016  Q4 2015  FY 2016  FY 2015 

Net Income

  $49,342  $44,015  $148,498  $139,315 

Add (Subtract):

     

Equity in earnings of affiliates, net of income tax provision

   (1,983  (1,584  (6,925  (5,533

Income tax provision

   (4,096  434   7,904   7,389 

Interest expense, net of interest income

   24,745   23,880   100,222   94,558 

Loss on extinguishment of debt

   —     —     15,885   —   

Depreciation and amortization

   29,030   28,129   114,916   106,756 

General and administrative expenses

   40,262   39,276   148,709   137,040 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net Operating Income, net of operating lease obligations

  $137,300  $134,150  $529,209  $479,525 
  

 

 

  

 

 

  

 

 

  

 

 

 

Add:

     

Operating lease expense, real estate

   6,505   8,397   32,232   27,765 

Start-up expenses,pre-tax

   —     —     1,939   4,658 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net Operating Income (NOI)

  $143,805  $142,547  $563,380  $511,948 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net Income

  $49,342  $44,015  $148,498  $139,315 

Income tax

   (4,122  760   10,245   9,427 

Interest expense, net of interest income

   24,745   23,880   116,107   94,558 

Depreciation and amortization

   29,030   28,129   114,916   106,756 
  

 

 

  

 

 

  

 

 

  

 

 

 

EBITDA

  $98,995  $96,784  $389,766  $350,056 
  

 

 

  

 

 

  

 

 

  

 

 

 

Adjustments

     

Net loss attributable to noncontrolling interests

   94   43   217   123 

Stock based compensation expenses,pre-tax

   3,098   3,107   12,773   11,709 

Start-up expenses,pre-tax

   —     —     1,939   4,658 

M&A related expenses,pre-tax

   —     —     —     2,174 

Gain on sale of real estate assets,pre-tax

   (952  —     (952  —   
  

 

 

  

 

 

  

 

 

  

 

 

 

Adjusted EBITDA

  $101,235  $99,934  $403,743  $368,720 
  

 

 

  

 

 

  

 

 

  

 

 

 

 

*all figures in ‘000s