Section 2 Financial Information
Item 2.02. |
Results of Operations and Financial Condition.
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On November 4, 2021, The GEO Group, Inc. (“GEO” or the
“Company”) issued a press release (the “Earnings Press Release”)
announcing its financial results for the quarter and nine months
ended September 30, 2021 and updating its financial guidance
for the fourth quarter and full year 2021. A copy of the Earnings
Press Release is furnished hereto as Exhibit 99.1. GEO also held a
conference call on November 4, 2021 to discuss these matters,
a transcript of which is furnished hereto as Exhibit 99.2.
In the Earnings Press Release, GEO provided Net Operating Income,
EBITDAre, Adjusted EBITDAre, Funds From Operations, Normalized
Funds From Operations, Adjusted Funds From Operations and Adjusted
Net Income for the quarter and nine months ended September 30,
2021 and the comparable prior-year periods that were not calculated
in accordance with Generally Accepted Accounting Principles (the
“Non-GAAP Information”) and
are presented as supplemental disclosures. Generally, for purposes
of Regulation G under the Securities Exchange Act of 1934,
Non-GAAP Information is any
numerical measure of a company’s performance, financial position,
or cash flows that either excludes or includes amounts that are not
normally excluded or included in the most directly comparable
measure calculated and presented in accordance with GAAP. The
Earnings Press Release presents the financial measure calculated
and presented in accordance with GAAP, which is the most directly
comparable to the Non-GAAP
Information, with a prominence equal to or greater than its
presentation of the Non-GAAP Information. The Earnings
Press Release also contains a reconciliation of the Non-GAAP Information to the financial
measure calculated and presented in accordance with GAAP which is
the most directly comparable to the Non-GAAP Information.
Net Operating Income is defined as revenues less operating
expenses, excluding depreciation and amortization expense, general
and administrative expenses, real estate related operating lease
expense, and start-up expenses, pre-tax. Net
Operating Income is calculated as net income adjusted by
subtracting equity in earnings of affiliates, net of income tax
provision, and by adding income tax provision, interest expense,
net of interest income, gain/loss on extinguishment of debt,
depreciation and amortization expense, general and administrative
expenses, real estate related operating lease expense, gain/loss on
real estate assets, pre-tax, and start-up expenses, pre-tax.
EBITDAre (EBITDA for real estate) is defined as net income adjusted
by adding provisions for income tax, interest expense, net of
interest income, depreciation and amortization, and gain/loss on
real estate assets, pre-tax. Adjusted EBITDAre (Adjusted
EBITDA for real estate) is defined as EBITDAre adjusted for net
loss attributable to non-controlling interests, stock-based
compensation expenses, pre-tax, and certain other adjustments
as defined from time to time, including for the periods presented
M&A related expenses, pre-tax, loss on asset divestiture,
pre-tax, start-up expenses, pre-tax, one-time employee restructuring
expenses, pre-tax,
COVID-19 expenses,
pre-tax, close-out expenses, pre-tax, and other non-cash revenue and expense,
pre-tax.
Given the nature of GEO’s business as a real estate owner and
operator, GEO believes that EBITDAre and Adjusted EBITDAre are
helpful to investors as measures of its operational performance
because they provide an indication of its ability to incur and
service debt, to satisfy general operating expenses, to make
capital expenditures and to fund other cash needs or reinvest cash
into its business. GEO believes that by removing the impact of its
asset base (primarily depreciation and amortization) and excluding
certain non-cash charges,
amounts spent on interest and taxes, and certain other charges that
are highly variable from year to year, EBITDAre and Adjusted
EBITDAre provide its investors with performance measures that
reflect the impact to operations from trends in occupancy rates,
per diem rates and operating costs, providing a perspective not
immediately apparent from net income attributable to GEO.