Good day, ladies and gentlemen, and welcome to the Quarter 4 2012 GEO Group Inc. Earnings Conference Call. My name is Ian, and I'll be your operator for today. [Operator Instructions] As a reminder, the call is being recorded. Now I'd like to hand the call over to Mr. Pablo Paez, Vice President of Corporate Relations. Please proceed, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us for today's discussion of the GEO Group's Fourth Quarter 2012 Earnings Results. With us today is George Zoley, Chairman and Chief Executive Officer; Brian Evans, Chief Financial Officer; and John Hurley, President of GEO Corrections & Detention. This morning, we will discuss our fourth quarter performance and business development activities. We will conclude the call with a question-and-answer session. This conference call is also being webcast live on our website at www.geogroup.com. Today, we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the Safe Harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings, including the Forms 10-K, 10-Q and 8-K reports. With that, please allow me to turn this call over to our Chairman and CEO, George Zoley. George?

Thanks, Pablo, and good morning to everyone, and thanks for joining us as we review our fourth quarter and year-end results and provide an update of our efforts to pursue quality growth opportunities and return value to our shareholders. Our strong earning results continued to be driven by sound operational and financial performance from our diversified business units in the U.S. and internationally. During 2012, GEO achieved a historic milestone with the completion of the corporate and legal restructuring of our business units, which enabled us to become the first fully integrated equity REIT specializing in the design, development, financing and operation of correctional, detention and community reentry facilities worldwide. Our conversion into a REIT followed a comprehensive review conducted by our Board of Directors and senior management. Following this review, we took all the necessary steps to reorganize our company into separate legal, wholly owned operating business units to a taxable REITs subsidiary, which allowed us to maintain the strategic alignment of our diversified business segments under one entity while maximizing our ability to create shareholder value. The steps we took to operate as a REIT as of January 1, 2013, were validated by the receipt of our private letter ruling from the IRS on January 18. In connection with our REIT conversion, we paid a special dividend of approximately $350 million or $5.68 per share to our shareholders of December 31, 2012. And we have increased our annual dividends from $0.80 per share to $2 per share, annually. Our first quarterly REIT dividend of $0.50 per share will be paid on March 1 to shareholders of record as of February 15. We have officially joined the National Association of REITs, or NAREIT, which is the worldwide representative of REITs and publicly traded real estate companies. We are very…

Thank you, George. Good morning, everyone. We are very pleased with our fourth quarter and year-end results, as well as our confirmed outlook for 2013. For financial reporting and historical comparisons, we have treated as discontinued operations the managed-only contracts in Mississippi, which were discontinued during the third quarter of 2013 -- '12, as well as the divestiture of our GEO Care health care facility contracts, which was completed on December 31. As disclosed in our press release, we reported pro forma income from continuing operations of $0.44 per diluted share for the fourth quarter and $1.49 for the year. Our quarterly results exclude the impact of a onetime gain of $1.28 per share related to the elimination of net deferred tax liabilities in connection with our REIT conversion. This gain was offset by $0.15 in REIT-related costs and $0.01 per share in startup expenses and $0.01 per share in international bid costs. Our adjusted funds from operations for 2012 increased to $3.52 per share from $2.90 per share in 2011. Our total revenues for the year increased to approximately $1.5 billion from $1.4 billion a year ago. Approximately 60% of our total revenues in 2012 were generated by our company-owned and company-leased properties. Our net operating income or gross profit for the year increased to $390 million from $371 million a year ago. Approximately 70% of our net operating income in 2012 was generated by our company-owned and company-leased properties. Our company-wide adjusted EBITDA for the year grew to $319 million from $301 million a year ago. Our 2012 results reflect the activation of approximately 4,000 new beds by our U.S. Corrections division, which added approximately $80 million in annualized revenues. Additionally, during 2012, our Reentry Services division added more than $6 million in annualized revenues with the activation…

Thanks, Brian, and good morning, everyone. I'd like to address select publicly known business development opportunities in our key segments starting with the federal market in the 3 federal government agencies that we serve. We have long-standing partnerships with the Federal Bureau of Prisons, the United States Marshals Service and the United States Immigration and Customs Endorsement or ICE. And we provide cost-effective solutions for them at a number of facilities across the country. We continue to see meaningful opportunities for us to partner with all 3 of these federal agencies, notwithstanding the various issues with the federal budget. The Federal Bureau of Prisons continues to face capacity constraints coupled with a growing offender population. ICE and the United States Marshals Service continue to consolidate existing populations into larger, more modern facilities which have -- has driven the need for additional private beds as evidenced by the recent activation of our ICE contract in Adelanto, California and our new contract with the U.S. Marshals Service in Aurora, Colorado. With regards to new business opportunities, the Bureau of Prisons has issued a solicitation for up to 1,600 beds at existing facilities, which can be located anywhere in the country. Proposals under this procurement were submitted last September with a contract commencement date projected for September 1, 2013. Additionally, the Customs and Border Protection Agency issued a request for a proposal for the provision of secure transportation services with the Southwest border. We expect a contract award to be announced in the first half of this year. Turning to our state and market segment. As states across the country continue to face their budgetary pressures, their ability to achieve cost savings becomes an even more important priority, which leads to increased interest in prison privatized projects. Although the prisoner population has declined…

Thank you, John. And in closing, we are very pleased with our fourth quarter and year-end results in our core operations in the U.S. and internationally, which continue to deliver solid operational and financial performance. Our company remains focused on effectively allocating capital to enhance value for our shareholders. Our historic conversion into the first fully integrated REIT in our industry has maximizing our ability to return value to our shareholders, allowing us to increase our annual dividends from $0.80 to $2 per share. And as we've discussed today, we are focused on increasing our dividend payout ratio and AFFO through the continued organic growth of the company, as well as the refinancing of our credit structure, which will give us more flexibility to return a higher portion of our funds available for distribution to our shareholders. We believe that these efforts will continue to enhance value for our shareholders and reduce our overall cost of capital which will, in turn, allow us to deliver more cost-effective service solutions for our clients worldwide. We also believe that our diversified growth and investment strategies have positioned GEO as the leading provider of corrections, detention and community reentry services through a GEO continuum of care that can deliver performance-based outcomes and significant cost savings for our clients worldwide, while continuing to enhance value for our shareholders. As I have expressed to you in the past, we view all of the different initiatives to enhance shareholder value as complementary and none are pursued to the detriment of the others. This concludes our presentation. We would now like to open the call to your questions.

[Operator Instructions] And your first question comes through from Kevin Campbell of Avondale Partners.

I wanted to start with your comments about the refinancing in the payout ratio, could you maybe give a little bit more color on what specific piece of the capital structure actually needs to be refinanced? And whether or not there would be interest expense savings from that or an increase in interest expense? And then second part, where ultimately do you see that payout ratio going once you get that refinancing done?

Well, the main piece that we would be focused on refinancing right now would be the senior credit facility. So I think the interest rate environment -- we're going to get consistent margin spread, consistent terms but it's a change in the covenants in the senior credit facility which will allow us to continue to pay dividends as a REIT at much higher payout ratio than the current credit facility envisions or builds capacity towards. So we'll take care of that as necessary in the near future, as we said. And then on a go-forward basis, we're mindful that the AFFO payout ratio is very important to shareholders. And I think as we got comfortable as a REIT, we will look at that and we will revise it as we feel it's appropriate.

Okay. And that payout ratio, maybe -- I'm sorry, not the payout ratio but the AFFO calculation. Obviously, there's been some differences as to how you guys calculate it versus CCA. So I'm just curious to maybe get, specifically, why you believe your calculation is more appropriate or at least more appropriate for you?

I don't know if it's exactly -- I think it's just that's what we feel is appropriate for us. It looks at the total cash flow of the business is available ultimately for distribution to our shareholders. And so that's how we came up with that calculation. We think it's appropriate to include all the depreciation and amortization, and we're taking into account maintenance CapEx to offset that. So I think that's the appropriate way to do it.

And given all the moving parts from the moving assets of the discontinued ops and some things like that, could you talk about or give us some color -- Brian, you've done this before in the past on what maybe we should expect D&A and interest expense and tax rate to be -- tax rate, in particular, now that you're that -- you've converted to the REIT and G&A as a percentage of revenues?

Well, I think, if you look in the supplemental -- and I know we put out a new supplemental and it has a lot more information in it but it has a lot of those components to it. So in our supplemental we're providing sort of an outlook reconciliation starting with our net income. But the components of D&A, probably about $95 million overhead, is approximately $100 million, interest expense is about $75 million cash interest expense and then probably, another $5 million to $7 million in noncash amortization and debt financing fees, et cetera. So I think that was all the components that you mentioned.

Okay. That's helpful. I didn't realize it was in there. And then lastly, maybe, George, you could talk about your thoughts on immigration reform? And I know it's early stages but ICE is clearly a meaningful customer for GEO. So any initial thoughts on what's been discussed and where this could be going and how you're planning for it?

The first point I'd like to make is our company doesn't take any involvement in the legislative part of immigration reform as to who is incarcerated and for what reasons. All we do is provide the services for secure residential care. And the people that go into our facilities presently are predominantly criminal aliens. And that's, I think, the current policy of ICE and I think that will continue to be the current policy or future policy of ICE. Although some of the facilities that we are now operating are for other classes of individuals that provide better accommodations and in a more civil environment, and we think there'll be a continued need for those facilities. As ICE tries to apply the new ICE standards to all of its facilities, I think the newer facilities that have been developed such as ours will be the ones that'll be used in the future, because those facilities and those standards are much more demanding and what they provide as services to those people that are being detained.

On the short term, at least, you're not expecting any major changes for immigration, detention populations in total from reform?

No. We think that the total number of authorized beds, which is approximately, I think, 34,000, will continue to be this -- about the same number. And as I said, it holds, primarily, criminal aliens, and we think that'll continue to be the case in the future.

And we have another question for you. This one's from Kevin McVeigh at Macquarie.

I wonder if you could just give us a sense of how the response has been from some of the new REIT -- newer REIT investors you've been talking to? And then just in addition to the payout ratio boost, how should we think about the longer-term growth of the annual dividend, independent of payouts?

Well, I don't know that we've had a lot of reaction with REIT investors, as yet. I think that's going to come very shortly in the next 30 to 60 days as we get on these different indexes. So for the second part, I'll defer to Brian.

Well, I guess I'll just turn back to what we said with regards to AFFO. The dividend will increase as we adjust our capital structure, as we grow the underlying business and as we reactivate facilities. So I think those are the 3 prongs that will affect the standalone dividend growth.

Got it. And then can you just remind us what, kind of carrying those 6,000 idle beds, the impact on revenue and ultimately earnings would be?

I think the total swing is $0.60 EPS.

And we have another question for you. This one is from the line of Clint Fendley at Davenport. Clint D. Fendley - Davenport & Company, LLC, Research Division: To follow up on the last question, I'm wondering with regard to the 6,000 beds that are in inventory, is it possible that any of those could be utilized by the second half of this year or would that timetable be too aggressive?

No. I think that's a distinct possibility. On the -- just to give you a sense of timing, the state budgets are being discussed and debated at this very time. It's a spring kind of calendar and then they take effect typically July 1. So if our project is a state project, the funding would be available starting July 1 for the second half of the year. Clint D. Fendley - Davenport & Company, LLC, Research Division: Okay. And then one other follow-up question. I'm wondering -- I know you guys have been in the news over the last couple of days, over the naming rights to the FAU Stadium. I'm wondering is there any financial impact in 2013 just from your $6 million gift that you're making here.

No, there isn't, and that gift is being made over a 12-year period. Clint D. Fendley - Davenport & Company, LLC, Research Division: Ok. So it's something I guess that would be amortized over that entire...

12 years. Clint D. Fendley - Davenport & Company, LLC, Research Division: Okay. Well, kudos to very generous gift there.

It was a gift from the GEO Foundation to the Florida Atlantic University Foundation. And it paid in 1/12 increment per year.

We have another question for you. This one is from the line of Tobey Sommer at SunTrust.

I wonder if you could provide some additional color on the monitoring opportunity in the U.K. and what may have changed to make it less attractive?

Well, it was an extraordinarily long procurement that's still going on today. I guess it's 1.5 years now. And it's very expensive, resource-intensive and it's -- and the execution by whoever wins this thing would be very expensive and resource-intensive. And we just felt our resources at this time are better aimed and focused on the U.S. opportunities.

Are there -- could you give us some color on what U.S. opportunities there are in the floor to keep an eye on for '13?

Well, when I say that I mean all of the opportunities, not just monitoring opportunities. And I think John Hurley went through the ones that are publicly known and we don't discuss the ones that are not publicly known.

One last question for me. On the refinancing, do you have a timeline that you would expect that to take place on so that we can just kind of keep an eye out for catalysts?

Well, I would say in the near future, within the first half of this year.

There's no further questions at this moment in time. So ladies and gentlemen, no further questions.

Very good. Well, thank you everyone, and we look forward to addressing you on our next conference call.

Thank you for your participation in today's conference. Ladies and gentlemen, this concludes the presentation and you may now disconnect. You enjoy the rest of the day. Good day.