Good morning. And welcome to The GEO Group Fourth Quarter 2016 Earnings Conference Call. All participants will be in 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, and Corporate Relations. Please go ahead.

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 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 fourth quarter and full year 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 investors.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 of the 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?

Thanks Pablo and good morning to everyone and thank you for joining us on this call. We’re very pleased with our strong fourth quarter and year end results and our outlook for 2017, which reflect strong operational and financial performance within our diversified business units of GEO Corrections & Detention’s and GEO Care. Our quarterly results are driven by a higher occupancy rates across our diversified real estate portfolio particularly throughout a number of our federal facilities, in addition to the continued high utilization rate of GEO Care’s ISAP program with ICE. With respect to our real estate portfolio, as a REIT our Company has provided essential real estate and management solutions to government agencies in the fields of detentions, corrections and community reentry facilities for more than 30 years. Today, we own or manage over 87,000 beds worldwide in a diversified network of real estate assets, making GEO the seventh largest correctional organization in the world. During 2016, GEO Corrections and Detention processed over 276,000 admissions and 267,000 releases while managing in average daily population of more than 60,000 individuals without any significant incidents. Additionally our GEO Transport division transported more than 735,000 passengers while driving more than 16 million miles in the U.S. and internationally without any significant incidences. We are extremely proud of these operational achievements, which we believe are the foundation upon which we can deliver enhanced rehabilitation programs for the men and women entrusted to our care. As a socially responsible service provider, we are continuing to expand our organizational and financial commitment to be the world’s leader in the delivery of offender rehabilitation and community reentry programs. Within our GEO Care business unit, we have continued to expand our GEO Continuum of Care division by doubling our annual expenditure commitment from its current cost…

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 fourth quarter 2016 a $0.66, including approximately $1 million, net of tax and a gain on sale of real estate assets and approximately $2 million in non-recurring tax benefits. Excluding these items, we reported adjusted EPS of $0.62 per share and Adjusted Funds From Operations of $1.04 per share for the fourth quarter 2016. Our G&A expense for the quarter included additional business development related expenses that were incurred during the fourth quarter. Our revenues for the fourth quarter 2016 increased to approximately $567 million from $500 million a year ago. Our construction revenue for the fourth quarter was approximately $70 million, compared to $40 million in the fourth quarter of 2015. As a reminder, our construction revenue is related to our Ravenhall project in Australia and has little or no margin. For the fourth quarter 2016, we reported net operating income of approximately $144 million, compared to fourth quarter 2015, our fourth quarter 2016 results, 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 late fourth quarter 2015 and overall higher utilization rates for our federal facilities under contract with Immigration and Customs Enforcement as well as the Immigration and Customs Enforcement ISAP program. Moving to our announced acquisition of Community Education Centers or CEC, as we disclosed this morning we have entered into a definitive agreement to acquire CEC in an all cash transaction for approximately $360 million, excluding transaction related expenses.…

Thanks Brian, and good morning to everyone. I’d like to give you an update of our GEO Corrections and Detention segment. As you maybe aware, GEO has enjoyed a three decade long partnership with the federal government and we currently provide services for The Federal Bureau of Prisons, U.S. Immigration and Customs Enforcement, more commonly refer to as ICE and the U.S. Marshals 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 the international markets, GEO is the only U.S. publicly traded company, providing corrections and detention services overseas. We operate in the UK, Australia and South Africa. We’re extremely proud of our longstanding partnerships with our government customers in the U.S. and internationally. While at times 2016 was a challenging and trying year for our dedicated employees, their collective professionalism and hard work let GEO to achieve several important milestones. And I’d like to echo George’s statement that we are extremely proud of the men and women who proudly represent our company day in and day out. Throughout the year our facilities process over 276,000 admissions and 267,000 releases and our employees managed an average daily population of more than 60,000 individuals without any significant incidents. Our facilities also achieved operational excellence with a successful completion of more than 50 audits by entities such as the American Correctional Association or ACA, The Prison Rape Elimination Act certification process and other review processes. In fact, during the most recent ACA conference last month, 12 GEO facilities received accreditation from ACA with four facilities going through…

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 provides services for approximately a 166,000 individuals under community supervision, including 123,000 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 16% year-over-year revenue growth in 2016. Additionally, we accomplished a number of important milestones during the year. As George mentioned, our GEO Continuum of Care division completed approximately 5.9 million hours of programming. We average close to 12,000 daily participants in academic programs, which led to 1,849 high school equivalency degrees being awarded. Our vocational courses averaged more than 24,000 daily participants resulting in more than 7,600 completions. And we awarded 8,200 substance abuse program completions, while averaging approximately 4,000 daily participants. Additionally, through our post-release services program, which was only launched in late 2016, we currently have 291 participants, a 139 of whom have already been released into their respective communities and a 152 remain in our facilities for pending release. Of those participants who are reintegrating into the community more than 50% have already been able to gain employment, as a result of our post-release support services. We believe these remarkable achievements are making the difference in the lives of the men and women…

Thank you, Ann. Over the last 10 years, GEO has grown both through organic projects as well as strategic acquisitions. We have made every major acquisition available in the corrections industry, involving detention, corrections, community reentry facilities and electronic monitoring. We have an extensive track record of successfully integrating those acquisitions and creating long-term value for our shareholders and we believe that in each of these service lines we have become a world leader and are recognized by our customers as best-in-class. We are excited about our announced acquisition of CEC, which we believe we’ll further solidify our position as the leading provider of evidence-based rehabilitation and community reentry services in the world. Following the acquisition of CEC, GEO will have 98,000 beds making it by far the largest private provider of detention, correctional and community reentry services. GEO will also become the fifth largest correctional organization in the world. We are also excited about the opportunity to solidify our position as the leading provider of evidence-based rehabilitation and community reentry services in the world. To this end, we have doubled our annual company commitment from $5 million to $10 million to continue to expand the delivery of our GEO Continuum of Care providing enhanced offender rehabilitation, integrated with post-release services. We also continue to be optimistic about the demand for our services and our growth potential, in addition to the expected additional revenue and earnings from CEC, we currently have approximately 5,000 available beds, which we believe could generate between $40 million and $50 million in annualized adjusted EBITDA. It is gratifying to see GEO’s continued financial success based on its successful diversification and commitment to operational excellence. It also underscores our belief that as a company we are at our best when helping those in our care reenter society as productive and employable citizens. This concludes our presentation. And we would now like to open the call to your questions.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Tobey Sommer of SunTrust. Please go ahead.

Hi. This is actually Kwan Kim on for Toby. Thank you for taking my questions. First off the DHS Secretary, John Kelly yesterday directed the agency to end the catch and release policy on the border. Could you talk about the kind of conversations you’re having regarding potential new contracts and the timeline under destructive? Thank you.

I believe ICE has been visiting various facilities around the country to expand its capacity because of the – among other things the discontinuation of the catch and release program which meant essentially as people were caught illegally crossing the border, they were held very temporarily and just let go instead of being detained. I think the new policy requires in most cases detention and informal processing of the initials – of the individuals and that will take several thousands of beds. And so thus there is – I believe a national canvassing of the available capacity in the entire country to help assist ICE in this new expanded and more aggressive border security program.

Thank you. And looking at the longer term how might GEO business and the mix looks different in the next 24 to 40 months in terms of its diversification.

Well. As I said with the acquisition of CEC, we would be by far the largest provider of community reentry services. With respect to detention services, in support of border security, we would continue to be the largest provider of detention services to the three federal agencies that is to ICE, the Bureau of Prisons and the U.S. Marshals Service with this increased and expanded approach to border security, the first agency that will need additional capacity is ICE. Because that the Border Patrol will catch the individuals and then send them to an ICE facility. Subsequently there will be a need by the U.S. Marshals Service for those people that have committed criminal acts and need to be detain for adjudication and further on down the line BOP will need additional capacity as well for those people who’ve been sentenced and need to serve their time in one of the CAR facilities. So it’s really an escalation of capacity need for all three federal agencies as a result of the president’s new executive borders redirecting the approach to border security for the three federal agencies.

Thank you very much.

The next question comes from Michael Kodish of Canaccord Genuity. Please go ahead.

Great. Thanks for taking my questions. I guess just to start out with the acquisition of CEC. Just doing a little back of the envelope math what you guys disclosed on the 9% to 11% accretive to EBITDA. I think that kind of translates to the transaction completing around a nine times EV to EBITDA multiple on 2018 estimates. Is that fair for pricing?

I mean it’s a reasonable calculation, I can’t comment [indiscernible], but it’s a reasonable calculation.

Okay. Thanks. And then what is the occupancy currently at CEC is there any underutilized capacity any opportunity there.

Our estimates for that run rate that we’ve described is based on their current run rates there is some underutilized facilities for instance the Delaney Hall facility that they have is 1,000 bed facility its currently 500 to 600 beds that are utilized. So there is – I want to say their occupancy rate is in the mid 70’s to close – about 75%, 78% so there’s about 3,000 beds maybe that are available that are underutilized between that reentry facilities and their correctional facilities. And in longer-term that will be something that we’ll continue to work on improving but our estimate for 2018 doesn’t make any assumptions with regards to that.

Great. That’s really helpful. And then you know that it’s only modestly accretive to 2017. Can you discuss some of the dynamics behind that when you say modestly accretive just considering its going to close in the second quarter and the 9% to 11% would be translate maybe to $15 million to $20 million in EBITDA. That seems like a fairly sizable amount. Can you just comment on that a little bit?

Yes. I think it’s just the timing of when some of the synergies work in and so forth. And we wanted to give ourselves some room on that. But I think 2018 is one we expect all the synergies to be in place really probably late this year. So that on a normalized basis in 2018 will get the full benefit of the transaction in the normalized results.

All right, thanks. And then just one last one on CEC and that has to do with leverage. I guess, where your thoughts currently on your present leverage level and then your post-acquisition leverage level and where your thoughts on issuing equity? I guess just considering that the stocks trading at all time highs.

I think we’ve said in the past when we look to do a larger transaction that our leveraged level may bump up a little bit. We think with growth in normalization of the transaction that the leveraged level will come down naturally. So I think we’ll be a little bit over 5 times maybe 5.25 post-transaction. And we’ll continue to look to source capital in a way that maximizes value for our shareholders. So overtime it will complement our capital needs with equity as necessary. But given this individual specific transaction I don’t know that necessarily drives us to the equity markets.

Okay. And that’s 5 to 5.25 does that include the non-recourse debt or is that excluding it?

No. I don’t include non-recourse debt in leverage calculation.

All right, and then just one more beyond CEC, if you don’t mind. So I guess outside of GEO and your other public counterpart. Can you give us a sense of what the idle stock might be like out there outside of your beds that ICE could potentially pursue? I mean are there other – any other significant competitors for ICE’s needs.

There maybe some a few government-owned facilities that are idle 3,000 to 5,000 beds.

All right. That’s really helpful, thanks. And I’ll jump in back in the queue with any off. Thanks, again.

[Operator Instructions] Our next question comes from Kevin McVeigh of Deutsche Bank. Please go ahead.

Great, thanks so much. Hey, nice job. I had a couple follow-up questions just on the administration efforts things like that. Hey, George, is there any way to think about just directionally the timing of what the senses would look like. I mean, obviously no varies depending upon the type of things you’ve picked up for but just thoughts on the sensing and then, if you’ve got, call it 5,000 idle beds. Is it fair to say that there could be another 3,000 coming on line with the CEC deal?

Well. Our available bed capacity would increase by those 3,000 beds. So it go from the 5,000 to 8,000.

Okay.

Yes.

And then just the sensing – because one thing I’m starting to think is – depend upon how aggressive the government bed gets if there’s – if you’ve got 8,000, if there is another 3,000 to 5,000 excess and other competitors got 13,000. Is there at some point where you may have to potentially build beds depend upon how aggressive the administration gets?

That is a possibility because there’s other issues that may come into play such as Kate’s Law. If that passes that will create a certain additional bed capacity that we haven’t contemplated as yet in any of our discussions, but I’m sure the Bureau of Prisons who would be responsible for incarcerating individuals under that law are – doing their planning work in the event that law is eventually pasted and put into place.

Got it. And then is it fair to say, as you’ve discussion with ICE would that be under existing procurement or would that be stuff that has to go out – back out to bed.

Well there is two contracting techniques available to ICE. One is to obtain the facilities through an intergovernmental agreement that means a host local community and we have several of those in place. The other is through two year emergency contract. Both can be put in place – a relatively quickly, approximately 60 to 90 days.

Got it. And then just a couple on CEC and I’ll get back in. How long where you guys doing the diligence on this deal.

About 10 years.

All right. So pretty quick turnaround I guess. And just the blended margins it sounds like you’re going to leave them into kind of the existing reporting structures. Any sense of – how dilutive it’s to margins and then how quickly they get up to the corporate average.

I think their own facilities have margins that are consistent with ours some of – like Delaney Hall a little bit under because it’s not fully utilized. So I don’t think it will dilute our margins too significantly.

Okay. Great, thank you.

Our next question is a follow up from Michael Kodish of Canaccord Genuity. Please go ahead.

Hey, thanks for taking my follow-up here. Just a few quick ones, G&A was a little bit elevated in the quarter. You mentioned that it was from business development expense I think it was something like $4 million to $5 million higher than kind of what guidance implied. Can you just give a little bit of color of really what’s in there and what we would expect on maybe future business development expenses as well?

I think it was just general stuff there with some other miscellaneous items. But I think out of the variance that was a single most significant item, it is probably $1 million to $2 million of the additional cost on a go forward basis those numbers will come down. I think we’ve provided guidance on the overall overhead spend for next year right around $150 million.

Great. Thanks. And then just one housekeeping item. I think you mentioned $87 million in scheduled spend during the first quarter for Ravenhall is that part of the $115 million in estimated total investment.

That’s our equity investment. So that’s what the $115 million might have been in Australian dollars but in U.S. dollars, its $87 million. So we made our full investment in the Australia project now.

Great that’s all for me. Thanks again.

The next question comes from [indiscernible] of Philadelphia Financial. Please go ahead.

Hi Congratulations on a great quarter. With the heighten demand do you see any upside of the per diem if so how much. Thank you.

The per diems for these federal contracts would carry a federal wage determination that would result in per diem rate reflecting probably higher than normal per diem rates than our company average. Because they were almost exclusively federal contracts with federal wage determinations.

And all owned facilities.

And all owned facilities. So it would be at the upper end of our per diem rates.

Okay. Great thank you.

The next question is a follow-up from Kevin McVeigh of Deutsche Bank. Please go ahead.

Great, thanks. One quick follow-up as Ravenhall comes on line in the third quarter, how should we think about the revenue contribution from that is it goes from construction and process to kind of serving inmates? And how does that ramp over the back half of 2017 and into 2018. I guess what do we affected into the guidance for that.

Well. The project is supposed to start November 1, I believe that’s the currents expected start date and it is a fixed price contract I believe from day one. So there’s not a ramp up per say. And I think we’ve guided historically about $70 to $75 million in net revenues to GEO on an annualized basis. So we’ve adjusted for that in our numbers in the fourth quarter.

There is not a financial ramp up but there is an actual prisoner ramp up that will take place over several months. But we paid the same flat rate as Brian said day one.

So it’s basically two months of the $70 million to $75 million should come in 2017.

That’s right.

Great. Thank you.

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

Okay. I’d like to say hello to any of the CEC employees that maybe listening and welcome them to the GEO Group and look forward to working with you. And thank all the listeners to our today’s conference call. And we thank you very much for participating and look forward to addressing you at our next call.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines. Have a great day.