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The GEO Group's 2010 Q1 Conference Call Focuses on Cornell Merger

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The GEO Group Logo
The GEO Group Logo
The GEO Group's 2010 Q1 call was fairly uneventful, filled with more of the common prepared remarks to reassure shareholders. The big news was obviously their planned merger with Cornell Companies which they hope will "prove beneficial to both parties," as they said about five times. GEO also said that once the merger is completed they will go under some re-branding to think of a new way to market their company. During the question and answer session, one of the investors asked about their customers and whether or not they disapproved of the deal. GEO stated that no customers disapproved of the deal when GEO called them.

To get into the details, their Q1 revenue was $288 million, up from $259 million this time last year. With regards to their stock buyback program, 2.7 million shares were bought up at $54 million of the available $80 million. 

Wayne Calabrese did the business overview section, and he had some notable quotes about speculative building in Michigan and Colorado (which was also covered in the 2009 Q4 call):

"In Michigan, our 530-bed Northlake facility is being expanded by 1,225 beds. As you may know, we previously submitted this expanded facility in response to the Bureau of Prisons' CAR-9 procurement. In March, the Bureau decided to cancel CAR-9 due to a funding shortfall, but we believe the agency continues to have a strong need for additional criminal alien beds. We are continuing our efforts to market the facility to state and federal agencies and we are hopeful that the Northlake facility will be activated later in the year or some time next year.

In Colorado, our 432-bed Aurora Immigration Detention Facility is being expanded by more than 1,000 beds. We believe our federal clients, primarily ICE and the U.S. Marshals, will continue to require beds as they consolidate existing populations into larger facilities such as our expanded Aurora facility. However, we currently do not have a contract for the use of the expanded beds."

The state markets (other than California, Arizona, and Florida) continue to have the lowest need for private prisons, and GEO has specifically stated they are mostly going after Federal contracts, and mostly after the detention of undocumnented immigrants and "criminal aliens". Calabrese also had this quick statement about their Bridgeport facility:

"In Texas, our managed-only 520-bed Bridgeport facility is currently being re-bid with a contract decision expected by the third quarter."

Another notable instance was when CFO Brian Evans stated,

"The Newton County facility, which was about an 850-bed facility, The Jefferson facility, also in Texas, and then the Fort Worth Community Center. Between those three facilities, I'll say it was about 1,700 beds that we exited from that were lower per-diem, lower margin contracts..."

The investors took interest in this statement because they wondered why GEO would just leave a facility and make no money rather than a little money. Their reasoning was that their new speculatively-expanded facilities in Michigan and Colorado would make up for the lost beds in Texas because they claimed Federal contracts were usually more long-term than State contracts. This was also discussed in the 2009 Q2 conference call to more detail.

For the most part the call was uneventful and focused on business dealings with the merger which is under litigation. Fell free to review our coverage of the past few GEO conference calls for a richer business history of the company.