Good day, and welcome to The GEO Group Fourth Quarter 2014 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Pablo Paez, Vice President of Corporate Relations. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us for today’s discussion of the GEO Group’s Fourth Quarter and Full Year 2014 Earnings Results. With us today is George Zoley, Chairman and Chief Executive Officer; Brian Evans, Chief Financial Officer; John Hurley, President of GEO Corrections & Detention; and Ann Schlarb, President of GEO Care. This morning we will discuss our fourth quarter and full year performance and current 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 the 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 security 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 Form 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. Thanks for joining us as we review our fourth quarter and year-end results and provide an update for our efforts to pursue quality growth opportunities and create value for our shareholders. We are very pleased with our quarterly and year-end results, as well as our outlook for 2015, which are representative of the continued growth in our earnings and cash flows. Our financial performance for the year was driven by sound operational and financial performance from our diversified business units in the U.S. and internationally, as well as the activation of several important projects. During 2014, our GEO Corrections & Detention division activated six new or expanded facilities totaling approximately 5,000 beds for both state and federal agencies in Florida, California, Texas and Louisiana representing approximately $80 million in annualized revenues. Additionally, our GEO Care division added approximately 300 new reentry beds to our real estate portfolio and opened a dozen new day reporting centers in the states like Pennsylvania, California, Virginia, and others, which represents over a 20% increase in the number of day reporting centers we operate across the country. These important project activations along with improved occupancies across our diversified real estate portfolio drove a 12% increase in our net operating income for the year. As reflected in our guidance, we expect this positive momentum to continue in 2015. During this year, we are scheduled to reactivate two company-owned facilities totaling more than 2,300 beds in inventory along with the expected completion of two company-owned expansions totaling approximately 1,300 beds. In addition to the project slated for activation in 2015, we have begun work on our announced project in Australia for the financing, development, and operation of the new 1,300 bed prison in Ravenhall near Melbourne. We have previously discussed…

Thank you, George, and good morning, everyone. Before addressing our quarterly results, I would like to briefly touch upon our company’s attractive investment characteristics, which are underpinned by our robust real estate portfolio of company-owned and leased facilities. Our total real estate portfolio encompasses more than 17 million square feet in owned, leased, and managed facilities, and we own more than 4,000 acres of land across the U.S. We currently own or lease approximately 70% of our facilities worldwide, and more than 70% of our NOI is generated by our company-owned and company-leased facilities. We have stable and sustainable income through increasingly longer-term contract arrangements. We have a diversified base of investment grade, government customers with multiple individual contracts with no single customer contract representing more than 5% of our revenues. We have historically enjoyed solid occupancy rates in the mid- to high 90s and strong customer retention rates in excess of 90%. Our long-term assets have a physical useful life of 75 years or longer and require relatively low levels of maintenance CapEx estimated at approximately 5% of our net operating income. Moving to our financial results, we are very pleased with our fourth quarter and year-end results, as well as our outlook for 2015. As disclosed in our press release today, our adjusted funds from operations for the fourth quarter 2014 increased to $0.81 per share from $0.72 per share for the fourth quarter 2013. On a GAAP basis, we reported fourth quarter 2014 net income attributable to GEO of $0.52 per share compared to $0.38 per share for the same period a year ago. Our revenues for fourth quarter 2014 increased to approximately $428 million from $384 million a year ago. Our quarterly revenues include approximately $17 million in construction revenue associated with our contracts for the…

Thanks, Brian and good morning everyone. I’d like to address select publically known business development opportunities in our key segments starting with federal market and the three federal government agencies that we serve. As we have previously reported GEO has longstanding partnerships with the Federal Bureau of Prisons, United States Marshals Service and United States Immigration and Customs Enforcement 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 partnering with all three of these federal agencies, particularly as increased emphasis is placed on offender rehabilitation programs and community reentry services. With respect to our 2015 scheduled project activations during the first quarter of this year, we expect to begin the reactivation of our 400-bed company-owned Mesa Verde Detention Facility in California, under an agreement with ICE. We have previously completed a $10 million renovation of the Mesa Verde Facility, which is expected to generate approximately $17 million in annualized revenues. During the second quarter, we expect to begin in-take at 1,940-bed company-owned Great Plains Correctional Facility in Oklahoma, under a new 10-year contract with the Federal Bureau of Prisons. Additionally, we were recently awarded a new 10-year contract by the Bureau of Prisons, for the continuing management of our 1,878 bed company-owned Moshannon Valley Correctional Center in Pennsylvania. This new contract will commence in the second quarter of 2016 following the expiration of the current contract. Under our new 10-year contracts with Bureau of Prisons, these two important company-owned facilities are expected to generate approximately $76 million in combined annualized revenues. In California, we are scheduled to complete the development of $45 million expansion of our company-owned Adelanto ICE Detention facility in July 2015. This important expansion will increase the facilities capacity from…

Thank you, John, and good morning, everyone. Turning to our GEO Care segment, each of our divisions continued to pursue several new growth opportunities. Our Reentry Services division continues to work with existing and prospective local and state correctional customers to leverage new opportunities in the provision of community-based reentry services in both residential facility and non-residential day reporting centers. During 2014, we activated six new day reporting centers in Pennsylvania, which are expected to generate more than $5 million in annualized revenues. Additionally, in California, we activated seven new day reporting centers in countries across the state, bringing our total number of day reporting centers to 22 in order to support state and county initiatives aimed at reducing recidivism and helping offenders reintegrate into the community. Additionally, during 2014, we activated a new day reporting center in Richmond, Virginia, which marked our entry into this important state market. With respect to our residential reentry centers, we recently activated a new company-leased 240-bed residential reentry center in Newark under contract with the State of New Jersey, which is expected to generate approximately $5.5 million in annualized revenues. Our youth services division continues to work towards maximizing the utilization of our existing asset base. We have continued to undertake a number of marketing and consolidation initiatives to increase the overall utilization of our existing youth services facilities. During 2014, we received new out-of-state placements at our existing facility in Colorado, as well as a new customer for detention services in Pennsylvania. Our Ohio facility experienced a rebound from a seasonably lower census in the first quarter of 2014, to near full capacity over the second-half of the year, and our facility in Texas remained at full capacity all year. Finally, our BI subsidiary continues to market its supervision and electronic monitoring services to local, state and federal correctional agencies nationwide. At the federal level, BI was successful in retaining 2 important contracts that went through a competitive rebid process in 2014. In September of last year, we signed a new 5-year contract with ICE for the continued provision of the community supervision and electronic monitoring services under the Intensive Supervision and Appearance Program or ISAP. The new ISAP contract is expected to generate approximately $47 million in annualized revenues. Also this past September, BI signed a new 5-year contract with the administrative office of the U.S. Courts for the provision of electronic monitoring services for federal probationers and pretrial defendants, which is expected to generate approximately $5 million in annual revenues. Overall, BI has continued to grow its market share of the electronic monitoring market in the United States. And during 2014, BI’s revenues increased 20% year-over-year. At this time, I’ll turn the call back to George for his closing remarks. George?

Thanks, Ann. In closing, we are very pleased with our fourth quarter and year-end results, as well as our outlook for 2015, which continue to be driven by solid operational and financial performance from our core operations in the U.S. and internationally. During 2014, we activated approximately 5,000 beds for both state and federal agencies in Florida, California, Texas, and Louisiana, representing approximately $80 million in annual revenues. Our GEO Care division opened approximately a dozen new day reporting centers and a new residential reentry center gaining market share in its market segments. We expect this positive momentum to continue in 2015 with the reactivation of 2,300 owned beds in inventory, the completion of two expansions totaling close to 1,300 owned beds, and the integration of the 6,500 owned beds we acquired from LCS. With the LCS acquisition GEO has increased its residential bed capacity from 79,000 beds to 85,500 beds. We are pursuing several publically known opportunities and we are exploring a number of other opportunities for the development of new projects and the potential purchase of additional assets. We believe that our diversified growth and investment strategies have positioned GEO as the leading provider of corrections, detention and offender rehabilitation services through our GEO Continuum of Care. We expect all of these efforts will continue to drive growth for our company and we remain focused on effectively allocating capital to enhance shareholder value. This concludes our presentation and we would now like to open the call for your questions.

We will now begin the question-and-answer session. [Operator Instructions] At this time we will pause momentarily to assemble our roster. Our first question today comes from Brian Ruttenbur with CRT Capital Group. Please go ahead.

Yes, thank you very much. A couple of questions, first of all, on your capital front, with Ravenhall going in, the acquisition being completed and your build-outs expected throughout 2015 and 2016, in the next two years do you anticipate the need for additional capital or are you all set?

Hey, Brian. This is Brian.

Hi, Brian.

With what we’ve discussed and what we’ve projected now, we have plenty of liquidity on our revolver to support the ongoing project development CapEx that we have right now.

Okay. And then possibly along the same lines, your recent acquisition, what is left to acquire out there? Is there any other sizeable acquisitions that can be made in the prison industry?

I don’t think we should comment on that right now.

Okay. All right, are you considering acquisitions outside of kind of core bricks-and-mortar adult prisons, are you looking at acquisitions down other lines? I know that there has been conversations in the past about using your balance sheet to possibly be involved with courthouses and sale leasebacks and things like that, other government type facilities. Are you still considering that, and do you have the capacity to do that?

Yes, we’re still considering that and we do have the capacity to do that and in part because of the financial planning we did last year and refinancing some of our credit facilities really to make it possible to do what we’re doing this year and moving forward.

Great. Thank you very much.

Our next question comes from Kevin McVeigh with Macquarie.

Thank you and congratulations on the results and outlook.

…Brian, can you give us a sense, in terms of LCS, if you do the math, it assumes you have somewhere around 6,500 beds, beyond the opportunities are there any other larger type opportunities to give you the confidence to scale up the level of unused beds? I mean, it’s been a level you haven’t had in quite some time. Is there anything you can just - the stage growing, is there anything else from a fundamental perspective to give you the confidence to take on that type of excess capacity, number one? And then number two, along the lines with LCS, why has the utilization been so less optimal? And what gives you the confidence that - it sounds like, is it 12 months or 24 months, should we think about that as kind of 18 to 24, or how do those beds scale? If you could help us with perspective on that.

As we experienced before in prior acquisitions, we’ve taken over as is the case here smaller companies who are less sophisticated and fewer resources to meet the fairly significant demands of some of our clients, particularly the federal agencies, which have very complicated service requirements. We are in a much better position to provide the clients what they really want versus LCS was previously and other smaller companies. We have three regional offices around the country that are in closer geographic proximity to oversee these facilities and work with them to develop better services on-site as well as to develop better relationships with their clients. So we’ve had experience doing this previously, we’ve been successful and we are optimistic that we can do it again here.

And, Kevin, I would just add to what George said, it’s important some of these facilities are underutilized, but most of these facilities already have contracts with existing customers, especially as George pointed out most significantly federal customers. So their biggest overall client is the federal government. And as George discussed this, we think that we have the ability to improve the operations more by improving the utilization of the facility. So we don’t really have to go out and get new contracts with them.

Understood. That’s helpful. And then, Brian, along those same lines, do the terms - so, say, obviously, if you are both serving ICE, do the terms stay the same, or would they - in terms of what the government is paying you, is it based on what the existing contracts were, or would you adjust them based on the acquired entity? And then just any thoughts on the AFFO sensitivity as those beds scale, particularly the ones at LCS?

Well, obviously, that’s all part of the process over time working on revising contracts and so forth. I think it’s important to think about from a scale perspective, as we add the incremental beds and revenue, because they are so significantly underutilized. It won’t be as proportional to the bottom line, as you might expect from normally facilities that are more highly occupied. So there would be a higher proportion of costs added, as we add beds, but still would be very incrementally profitable. So we will have to hire some staff and make them adjustments like that in the cost base, but that’s all factored into those numbers that we provided.

That’s super helpful. And then one last one if I could. Is there any type of incremental distribution associated with LCS? So similar when you converted to REIT, you had to purge your retained earnings; are there any capital returns as a result of the acquisition, or were they just not anything meaningful?

We did an asset purchase, so that’s not part of the equation here in this transaction. It could be potentially in a future transaction, but with this transaction it’s not the case.

Super. Thanks so much.

The next question is from Tobey Sommer of SunTrust.

Thank you. Wanted to ask a question about the investments you highlighted in the Continuum of Care. Are these added services that won’t be reimbursed by the customers, will they have a negative impact on margins kind of trying to understand how things - what the impact is near-term versus the positioning that you are making on a go-forward basis with those investments? Thanks.

The $5 million we referred is additional staffing kind of split half at the corporate level and half at the facility level. They are additive costs to our company that are included in our guidance. So it’s not going to be negative to our guidance, it’s already embedded in our guidance. And we believe that it’s really the investment in our company and our capability to perform a better service for our clients that will be appreciated and results in additional opportunities in the future - in the near future actually, because we are already being recognized in the U.S. and internationally as a premier provider of offender rehabilitation and it’s causing us in a large part to win new contracts because of that. So we are very committed to this new strategy. There is new initiative in the company focusing on offender rehabilitation that goes beyond the original origin of our industry, which was merely providing secure residential care for people, particularly for ICE in short-term low security detention. Now that we are providing longer-term detention in Corrections, particularly to states, we believe that it is logical that we improved our capabilities to better rehabilitate the people that we are housing and support them in through various different services post-release. So they can better assimilate into their communities and reduce the reoffending rate in the states in which they live.

Thank you. So this is a kind of a proactive choice as opposed to a response to current customer conversations?

Yes, it is. It’s proactive, but we have been working with our state clients in particular in partnership in restructuring our rehabilitation programs to better encompass our vision of the GEO Continuum of Care, because at the facility level, it is different than what our customers have asked us to do, which is kind of the traditional prison rehabilitation program and we’re kind of working outside that box in new evidence-based programming that requires different skills by different members of the rehabilitation staff requires specialized training of that staff, and all these things kind of work together to create a better results for the offender.

And how does this fit into the positioning of the company relative to potential federal prison reform? I’m curious not only the positioning of how this fits, but what you think the impact of potential prison reform will be on the corrections business.

Well, we think it may very likely lead to additional funding for post-release support service activities like halfway houses, day reporting centers, electronic monitoring. So we think it’s very positive win-win for everybody, for the industry as well as the clients and the offenders.

And what are your plans - my last question - for opening new day reporting centers and halfway houses? What’s the kind of growth do you have in your outlook for this year?

We’re looking at several right now that are out to bid. So we are pursuing some of those, and we are pursuing different day reporting centers across the country that are out to bid at the moment. And then working with our current customers to identify new opportunities they might need for expansion around the areas where we are in the state, so we’ve begun implementing them. We’re working with the customers on research and outcomes to look at the effectiveness of the programs which then leads them to expand them, so there is a lot of work going on in that area.

And from a growth perspective, is there a way to frame that that effort in the collaborative process you are having with customers?

Well, I think over the last several years, it’s been averaging better than 10%. And we don’t expect to see that change or going down, right now. I think with everything that George has highlighted in the discussions that are going on nationally, we expect that kind of rate to be sustainable.

Thank you. And that would be applicable to both the halfway houses and the day reporting centers?

Combination of both, I think there is both areas.

Okay. Thank you very much.

And electronic monitoring is well, the whole - all three of them together.

Terrific.

[Operator Instructions] Our next question comes from Ryan Meliker with MLV & Co.

Hey, thanks for taking my question. I just had a couple things I was hoping that you guys could provide some clarity on. I guess first probably Brian, you talked about the liquidity levels that you guys have and your ability to fund not only the recently announced acquisitions but also development over the next couple of years. But where does that puts you in terms of your leverage? And how much capacity would you have relative to what you would call your target leverage levels, when you take into account these acquisitions coupled with the projected development spend? I think you are around - I think it’s 4.5 times right now. And with this acquisition I think we estimate you go up over 5 times on 2015 numbers. Just some color there would be helpful.

Sure, I - will probably a little bit different in our numbers, but on a net debt basis I think will be around a little under 5 times levered post-transaction from a covenant compliance perspective. We have full access to the revolver, so there is no limitations from a capacity or access perspective. And when we model it out and look forward over time, even with the development CapEx, just based on the growth and as these projects normalize in, that will create some sort of some natural deleveraging, which will give us again additional expanded capacity if we need it. So with what we have available right now in the growth of the company, we expect our leverage to actually come down some over time.

Okay, that’s good. And then when you think about leverage overall, where is your comfort zone with? I’m assuming you look at on either a debt to EBITDA or debt as a percentage of gross asset value basis.

Again, we’ve been in this range for the last several years, probably three years or so between call it 4.25 and highest 4.8, 4.9, so right where we are, we’re comfortable with that range, and I don’t see it’s really stepping up above it much. But we are certainly comfortable right around 5 times, 4.5, 5 times.

Okay, great. That’s helpful. And then I guess just a little bit more color. I was hoping you guys might be able to share with regards to the Continuum of Care investment. If I recall correctly, in Ravenhall you guys have a bit of an incentive fee structure to reduce recidivism rates. Do you think that positioning more of your assets in the GEO Continuum of Care and your ability to, I guess, continually reduce recidivism going forward would position GEO to offer similar types of contract options for your partners here in the U.S.?

That’s certainly a consideration, it hasn’t occurred as yet. We’re in the beginning stages of implementing the GEO Continuum of Care and working it through to statistically validate the results of what we’re doing and that’s really a multi-year process between dealing with people in prison for six months to approximately a year in their the last stages of really of incarceration. And then following them for a year post-release and then allowing the adjudication process to determine the outcome of any possible reentry into the criminal justice system. It’s really a three year process before we really know the actual true effectiveness of the programming that you put in place. So we’re making this investment on long-term basis we think it’s the right investment for our company, for our clients. We think it’s a win-win for everybody and the offenders in particular. The more we can do to help better be involved with their rehabilitation, while in our care either while in the prison or post-release you know the better off I think everyone will be.

Yes, that's helpful. Thanks for taking my questions. That's all for me.

Our next question is from Jon Evans with JWEST LLC.

Can you just help us understand a little bit and then it's kind of a follow-up to the question before, relative to the acquisition? So you have this Michigan facility, which is a huge facility and it's got a bunch of fixed costs and nothing's in there. But you made this acquisition. And that's 50% kind of utilization, and you think you can get better. But why wouldn't you think that you could move those kinds of inmates into Michigan? Or can you give us any insight into Michigan because it's a big needle-mover?

Well, the acquisition of the LCS facilities geographically they’re based in the Southern states and so there is a geographic reason for their location by virtue of their client needs in those areas. Michigan is a whole separate story, it's in the North. And we are actively marking that facility and we are optimistic that this year we will be successful.

Got it. Okay. So it's more that with the acquisition you believe that you will get more potential ICE business, because it's closer to the border and Michigan is more from states, etc.?

Yes. From states that would be interested in sending prisoners out of state because of overcrowding situations.

And just a last question relative to Michigan, if you were able to fill that facility, how accretive would that be kind of on an annual basis when it was like a full year?

If we were to fill it, it would be a significant.

Over $0.10 better, that’s [indiscernible].

Okay, great. Thank you.

The next question is a follow-up from Tobey Sommer of SunTrust.

Thank you. I wondered if, George, you may give us an update on the potential for continued asset purchases kind of from customers. Those are dialogs that you are having in private. I'm just wondering how you assess the likelihood of being able to consummate something versus the last time we spoke. Thanks.

They are definitely still of interest, but they are kind of one-offs here and there. We still pursue them because there are situations that develop around the country where either a look - I guess, particularly local governments are interested in monetizing their assets to better support their balance sheets or relieve themselves of the financial responsibilities of some of these facilities. So I think those opportunities are still there. They may likely increase in the future and we are very much interested.

Okay, thanks.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you very much for joining us on the session. And we look forward to the next one.