BOCA RATON, Fla.--(EON: Enhanced Online News)--The GEO Group (NYSE: GEO) (“GEO”) announced today the signing of a contract with the State of California, Department of Corrections and Rehabilitation (the “Department”) for the out-of-state housing of up to 2,580 California inmates at GEO’s North Lake Correctional Facility (the “Facility”) located in Baldwin, Michigan. GEO will undertake a $60.0 million renovation and expansion project to convert the Facility’s existing dormitory housing units to cells and to increase the capacity of the 1,748-bed Facility to 2,580 beds. GEO will use free cash flow and borrowings available under its revolving credit facility to undertake this renovation and expansion project.
GEO expects to complete the cell conversion of the existing dormitory housing units in the second quarter of 2011 and the new 832-bed expansion in the fourth quarter of 2011. GEO will begin the intake of California inmates on May 1, 2011 under a management contract entered into between GEO and the Department, which has an initial term through June 30, 2014 and may be extended for successive two-year terms by mutual agreement. The ramp-up of the Facility is expected to be completed within approximately 19 months of May 1, 2011.
GEO expects that the management contract for the housing of California inmates at the Facility will generate approximately $60.0 million in annualized revenues at full occupancy with profit margins in line with GEO’s company-owned facilities. The management contract will have a 90 percent occupancy guarantee once the Facility reaches that level of occupancy.
George C. Zoley, Chairman and Chief Executive Officer of GEO, said, “This is a very important milestone for GEO. We appreciate the confidence placed in our company by the State of California with the signing of this contract, which will assist the State in meeting its present correctional bed needs in a cost-efficient manner under a long-term agreement. We look forward to the successful implementation of this contract at our company-owned North Lake Correctional Facility in Michigan and to building on our long-standing partnership with the California Department of Corrections and Rehabilitation.”
The GEO Group is a world leader in the delivery of correctional, detention, and residential treatment services to federal, state, and local government agencies around the globe. GEO offers a turnkey approach that includes design, construction, financing, and operations. GEO represents government clients in the United States, Australia, South Africa, and the United Kingdom. GEO’s worldwide operations include the management and/or ownership of approximately 79,000 beds at 116 correctional, detention and residential treatment facilities, including projects under development.
This press release contains forward-looking statements regarding future events and future performance of GEO that involve risks and uncertainties that could materially affect actual results, including statements regarding estimated earnings, revenues and costs and our ability to maintain growth and strengthen contract relationships. Factors that could cause actual results to vary from current expectations and forward-looking statements contained in this press release include, but are not limited to: (1) GEO’s ability to successfully pursue further growth and continue to enhance shareholder value; (2) GEO’s ability to access the capital markets in the future on satisfactory terms or at all; (3) risks associated with GEO’s ability to control operating costs associated with contract start-ups; (4) GEO’s ability to timely open facilities as planned, profitably manage such facilities and successfully integrate such facilities into GEO’s operations without substantial costs; (5) GEO’s ability to win management contracts for which it has submitted proposals and to retain existing management contracts; (6) GEO’s ability to obtain future financing on acceptable terms; (7) GEO’s ability to sustain company-wide occupancy rates at its facilities; and (8) other factors contained in GEO’s Securities and Exchange Commission filings, including the forms 10-K, 10-Q and 8-K reports.