Good morning. And welcome to The GEO Group Third Quarter 2016 Earnings Conference Call. 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 Investor 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 third quarter 2016 earnings results. With us today is George Zoley, Chairman and Chief Executive Officer; Brian Evans, Chief Financial Officer; Ann Schlarb, President of GEO Care; and David Donahue, President of GEO Corrections & Detention. This morning we will discuss our third quarter results 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 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 under 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 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?

Good morning, everyone. Thank you, Pablo, and thank you everyone for joining us on this call. We are very pleased with our strong third quarter results and our outlook for the fourth quarter and full year. We believe that our financial performance and continued organic growth is reflective of the diversified nature of our real estate and service platform. As a REIT, GEO has provided essential real estate and management solutions to government agencies in the fields of detention, corrections and community reentry facilities for over three decades. Today we own or manage over 87,000 beds worldwide in a diversified network of real estate assets. Additionally, as a service provider, The GEO Group continues to expand its organizational and financial commitment to be a world leader in the delivery of offender rehabilitation and community reentry programs. At the corporate level within our GEO Care business unit, we have continued to expand our GEO Continuum of Care division, which presently has an annual cost of $5 million. It is lead by an executive vice president overseeing two dozen subject matter experts in treatment, education, vocational trainee, case management and specialized training for all facility employees. Most recently, we have added a director post-release services overseeing several post-release services case managers, who would assist inmates in returning and reintegrating into their communities. Every day in the U.S., GEO has approximately 30,000 men and women in GEO facilities participating in evidence based in prison rehabilitation ranging from academic and vocational classes to life, skills and treatment programs. Additionally, through our network of community reentry facilities in the United States, approximately 7,000 individuals on a daily basis participate in programs aimed at helping their reintegration into their communities. We presently have 30 GEO facilities that involve more than 15,000 inmates in nine states, which…

Thank you, George, and good morning to everyone. As disclosed in our press release today, we reported net income attributable to GEO per share or GAAP earnings per share for the third quarter 2016 of $0.59, which represents a 13% year-over-year increase. We reported adjusted funds from operations for the third quarter 2016 of $0.96 per share, which represents a 7% year-over-year increase. Our revenues for the third quarter 2016 increased to approximately $554 million from $470 million a year ago. Our construction revenue for the third quarter was approximately $70 million, which was below our previous estimate of $84 million. As a reminder, our construction revenue is related to our Ravenhall project in Australia and has little or no margin. For the third quarter 2016, we reported NOI of approximately $145 million or 10% increase year-over-year compared to third quarter 2015, our third quarter 2016 results reflect the activation of an expansion to the Karnes Residential Center in Texas in December 2015, the assumption of operations of the 3,400-bed Kingman Arizona prison in December 2015, the new Geo Care contract with the Department of Homeland Security for case management services in November 2015 and $70 million in construction revenue compared to $25 million in construction revenue for the third quarter of 2015. These revenues from both periods are associated with our Ravenhall Prison project in Australia. Moving to our outlook for the balance of the year, we have increased our full year GAAP EPS guidance to a range of $1.88 per diluted share to $ 1.90 per diluted share and our adjusted EPS guidance to a range of $2.11 per diluted share to $2.13 per diluted share. We have also increased our full year AFFO guidance to a range of $3.65 per diluted share to $3.67 per diluted share.…

Thanks Brian, and good morning to everyone. I would to give you an update on our GEO Corrections and Detention segment. As you may be aware, GEO has enjoyed a three decade long partnership with the federal government and we currently provide services for the federal bureau prisons, U.S. immigration and customs enforcements, more commonly referred to as ICE and the U.S. Marshal Service. Additionally, we owned and/or manage correctional facilities for 10 states, including, Florida, Georgia, Louisiana, Oklahoma, Arizona, New Mexico, California, Vermont, Virginia and Indiana. Our business relationships with our state customers began in the mid 1980’s and now involve more than 20 facilities that are almost all medium security or higher. With respect to international business, GEO is the only U.S. publicly traded company, providing corrections and detention services overseas. We presently operate in the U.K., Australia and South Africa. With respect to our federal market, as you recall, the Department of Justice made an announcement in August related to the federal bureau prisons facilities, which are currently under private contract, in its announcement, the DOJ expressed concerns over the quality of operation at BOP contracted facilities and directed the BOP to evaluate the future renewals of private contracts, in order to reduce the use of privately operated facilities over time. As we express to you when the announcement was made, we believe it is extremely important to understand both the quality of metrics for our BOP facilities, as well as the overall needs of the BOP given the continued levels of overcrowding and BOP operating facilities. Our company has enjoyed a long standing public private partnership with the federal bureau prisons dating back to the 1990s and we take great pride in the operational quality of our owned and managed BOP facilities. We currently own and…

Thank you, Dave, and good morning, everyone. As you may remember, our GEO Care segment is comprised of four divisions. Our GEO reentry division manages 21 halfway houses totaling over 3,000 beds and over 60-day reporting centers nationwide with the ability to serve approximately 4,000 participants. Our youth services division oversees 12 residential facilities with approximately 1,300 beds and seven non-residential programs with approximately 1,200 participants. Our BI division monitors approximately a 142,000 offenders under community supervision, including 102,000 individuals through an array of technology products, including radio frequency, GPS and alcohol monitoring devices. Finally, our GEO Continuum of Care division oversees the integration of our industry-leading evidence-based rehabilitation programs both in prison and through our community-based and post-release services. The diversified nature of our divisions has allowed GEO Care to achieve approximately 17% year-over-year revenue growth for the first three quarters of 2016. We remain optimistic about our growth prospects going forward and we continue to be enthusiastic about the opportunity to expand our delivery of offender rehabilitation services through the GEO Continuum of Care. We believe that our focus on improved offender rehabilitation and community reentry programs is in line with current Criminal Justice Reform discussions. We view these discussions as positive and believe these efforts will create growth opportunities for our company. Each of our divisions continues to pursue several new growth opportunities. GEO reentry continues to work with existing and prospective local and state correctional customers to leverage new opportunities in the provision of community reentry services. These services are provided to real estate and programmatic solutions and residential settings, as well as case management and support services in non-residential day reporting centers. We are pursuing several new opportunities for residential reentry centers at the state and federal level and for new day reporting centers primarily…

Thank you, Ann. Over the last 10 years, GEO has acquired every major acquisition available in the corrections industry, involving detentions, corrections, community reentry facilities and electronic monitoring. In each of the service lines we have become a world leader and recognized as best in class. In fact, Geo is the seventh largest correctional organization in the world, with 87,000 beds and more than 20,000 employees located in U.S., Australia, U.K. and South Africa. More recently we have invested and reorganized the company to deliver the Geo Continuum of Care providing enhanced offender rehabilitation, integrated with post-release services. It is gratifying to see GEO’s continued financial success based on a successful diversification and commitment to operational excellence. It also underscores our belief that as a company we are most effective and at our best when we are helping those in our care reenter society as productive and employable citizens. This concludes our presentation. We would now like to open the call to your questions.

[Operator Instructions] And our first question comes from Michael Kodish of Canaccord. Please go ahead.

Hey. Good morning and thanks for taking my questions and very nice quarter. I guess, maybe just to start, for ICE, you are seeing this massive disparity between in flow, I you mentioned 44,000 going up to 47,000 in fiscal year 2017 and in the quarter I think it was around 34,000 beds they need to have. Seems like a pretty big opportunity. I guess, I just kind of wondering what the alternative is to and what seems like an emergency situation to go into the private, what alternatives are out there for ICEs?

Well, with respect to detention capacity, I think, the private sector is really the only logical solution for organization sector we will quickly meet the detention standards that ICE needs for our residential type of detention. Other than detention, they can put additional people on the ISAP program under electronic monitoring. I think those are their two most logical alternatives.

Great. That’s helpful. And then, turning to the -- sorry, go ahead.

Just like to add to that, so what we said is that, where in the past many years, there is normally been a downturn in the centers during first -- the fourth quarter, because of what we call the seasonality of ICE detention. We don't expect that to take place this year. In fact, we are seeing an increase in centers it -- likely in the fourth quarter from our third quarter, and that’s very different than we have ever experienced.

Great. That’s helpful color. And then turning to Grafton, so you said proposal were due this month. Just what sort of timeline from submitting the proposals to may be seeing something realized would you guys expect?

Well, they are actually due next week. So that’s very soon. And I think the timeline for tentative award is spring of next year and there is only three bidders in this case. And Grafton will be the largest facility -- correctional facility in all of Australia at 1,700 beds and…

Great. Thanks.

… largest private provider in Australia.

Great. Okay. And then, turning to the community based facilities. I notice that one I think -- one facility was lost in the quarter. I know it’s a small contribution to EBITDA, but I was wondering if you can talk little bit about that and then maybe opportunities for that facility?

No. I think during last quarter, maybe even this quarter restructured some facilities maybe in the leased with some of our Illinois contracts but, go ahead, Ann.

We consolidated facilities that we had nearby with [inaudible] (32:02) page and in Illinois our new facilities, that’s what that was.

All right. Thanks. That’s helpful. And then finally, I have lot of questions here. Just in terms of BI, in your electronic monitoring, 7% quarter-over-quarter growth I think there, but that’s like a 28% year-over-year. You mentioned the Massachusetts opportunity, so that seems like a great opportunity. I was wondering what the size of that might look like? How competitive it is? And then just kind of the sustainability of your electronic monitoring growth kind of what your expectations are there? Thanks.

It is a significant contract, currently competitor incumbent. It’s probably about $3.5 million annualized to year and we’ll competing aggressively for that contract, so it’s a nice opportunity. And the sustainability year-over-year we have several of the key contracts in the electronic monitoring division. We continue to enhance our technology products and services, so as we are offering solutions to our customers we have enhanced products that we are offering to our data analytics and other things along with our suite of technology that, we believe we will able to sustain and continue to grow that division.

Great. And just to confirm that was $3.5 million of annualized revenues on that Massachusetts contract.

Exactly…

Approximately…

Yes.

Great. Awesome. That’s truly helpful. Thanks again for answering the questions and once again nice quarter.

Thank you.

Thank you.

[Operator Instructions] Our next question comes from Tobey Sommer of SunTrust. Please go ahead.

Thanks. Could you refresh us on the capital that will be required if you are successful for the in the publicly known procurements that are out there and maybe let us know, how -- if you are successful, how much you choose to fund that additional investments? Thanks.

Hey. Tobey. This is Brian. I am just kind of think about what we’ve actually said about the capital requirements for be it that they were under review, I don’t think we have specifically stated what those amounts are, once we announce the contracts we will announce the actual absolute dollar value. But, there are obviously significant projects, the ICE opportunity the 1,000 beds and the Hamilton County opportunity is approximately 1,800 beds and Grafton has, as George discussed, 1,700 beds. And that equity commitment there will be similar to or possibly a little bit larger than Ravenhall. So all three of those are you know substantial project, using consistent averages there, several $100 million worth of capital requirements for this.

In -- whether the company choose to fund that with likely -- with debt or equity or a blend of both.

I mean, currently, we believe we can fund those with our revolving credit facility. So we probably look to use debt first and if we need to supplement with a little bit of equity we might. But between cash flows above our dividend payment and debt that will be our first choice.

[Inaudible] (35:48)

… three year project, it doesn’t require but all the capital front, its different tranches over a three-year period.

Thank you to point that out. What is the cash flow in access of the dividend payout, may be on an annualized basis so far this year or something like that?

On an annualized basis approximately $40 million to $60 million.

Okay. And could you give us an update on CAR 16 in where that sits in terms of maybe when we will get our next update or next steps?

Well, it’s in still progress, they has not been a best in finals. So that’s approximately all we know and maybe other than thinking that there will be a decision before the end of the year.

Okay. In sense it to you being able to speak only in the limited fashion about your ongoing dialogue with ICE about its growing needs. But could you discuss kind of conceptually, how you think about sort of committing the companies resources to helping out a customer that when it isn’t clear that that need will kind of exist long-term? Thank you.

Well, I think, our -- the answer in our responses along the lines of existing capacity not new construction and as we said in our presentation we do have approximately 3,000 beds that are available and could be easily provided and quickly, so in meeting their needs and all these beds need the ICE detention standards and it would very unusual for governments to have such beds quickly available or be able to meet the ICE detention standards. So we think the logical path for ICE will be to look towards the private sector for these beds, which may be for short-term and may be longer term. I don’t think anybody knows the answer to that as yet.

Okay. And then, I wanted to ask you a question about your recent BOP contract renewal, as we think about, may be the tension between the BOP’s own needs and the memo in discussion that initiated in mid-August, does that the framework of that contract seem like a template to you that could be replicated as other contracts come up for renewal? Thank you.

There are characteristics that, at that facility that are similar at our other facilities certainly and I would start with the knowledge that that particular facility is received very high exemplary performance ratings and those are conducted by teams of subject matter experts who come annually and review various areas of the facilities from medical, housing, different types of security services. So, overall that facility has done very well on a performance basis and we know that was one of the concerns by the DOJ. But all of our facilities as we said are outstanding with regard to performance. There was a cut down on some of the beds that were needed, so instead of full 2,500 beds, the bed capacity under the contract was reduced to approximately 1,900. But there was an opportunity to negotiate reasonable financial provisions to provide for those for reduction of those incremental beds based on an incremental cost reduction.

Thank you for that color. And then, George, just wanted to see if you could comment and give us an update on the private conversations that you’re having a direct dialogues, just in terms of the volume and intensity, could you compare that to six months or a year ago, particularly on the real estate opportunities? Thank you.

What is the question?

Just compare the volume of the conversations and the relative intensity that you are having now versus six month or 12 months ago.

Well, as I said, the -- we have seen a significant increase in the centers, we get census report every morning about what is the census at every one of our facilities and we track these census reports that are done on daily basis, so we put them on a chart to show monthly progress, so we compare to previous years and where -- I said previously, where in previous years, the fourth quarter usually shows a downturn in the census, this year is normally that there is actually uptick in the census that we expect to see continue for the balance of the year at least and it will be reflected in our operational and financial performance, and the basis for what is publicly known as an increase in capacity for ICE as there are more people coming across the border.

Thanks for your help.

[Operator Instructions] Our next question comes from James Kaylar of Bank of America. Please go ahead.

Hey, guys. How you doing?

Good. Thank you.

Yeah. Just first on Ravenhall, can you just sort of remind us sort of how to think about the earnings ramp once that facility is complete, and I think you mentioned the equity infusion we should expect that towards the end of ’17, is that right?

No. The equity infusion is January of 2017 and the contract start date after construction completion and commercial acceptance is November of ’17 and I believe they have begun paying for a 1,000 beds immediately.

Yeah.

So there is an actual ramp-up to some degree in the population, but they start paying for the first 1,000 beds immediately. And then ultimately the 1,300 bed facility, so depending on their need they may use the remaining 300 beds but when they decide to do they will be paying for 1,300 beds on a guaranteed base.

Right. Very good. And then, maybe just a conceptual question about the balance sheet and then also covenant question if you have it. I guess, just sort of given the develop -- recent developments it was going in the world, do you have views on where you -- what the leverage to be over the longer term and if you could just review the sort of covenant restrictions you have in the credit facility and the amount cushion you have?

So right now, we are not changing our view with regards to our leverage level, I think, we said, we are comfortable operating between 4 time and 5 time, and the average probably 4.5 times over the last several years. The primarily covenant level leverage limit is 6.25 times and so we have significant additional capacity yet worried about -- currently we are about 4.6 times, 4.7 times.

Okay. Great. Thank you.

And ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to George Zoley for any closing remarks.

Hey. Well, thank you for joining us on this conference call. We look forward to addressing you on our next one. Thank you.

And ladies and gentlemen, the conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.