The GEO Group, Inc.

Thank you, operator. Good morning, everyone, and thank you for joining us for today's discussion of The GEO Group's First Quarter 2012 Earnings Results.

With us today is George Zoley, Chairman and Chief Executive Officer; Brian Evans, Chief Financial Officer; John Hurley, President of GEO Corrections and Detention; and Jorge Dominicis, President of GEO Care.

This morning, we will discuss our first quarter performance 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 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 Forms 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. Good morning to everyone, and thanks for joining us as we review our first quarter results and provide an update of our efforts to pursue quality growth opportunities and return value to our shareholders.

The first quarter was an important financial and operational quarter for our company driven by the continued performance of our diversified business units and the activation of 2 new projects. In Texas, we opened the first facility designed and operated for low-risk immigration detainees under new federal detention standards in the United States.

The new GEO-owned, 600-bed Karnes Civil Detention Center will be operated under a partnership between GEO, Karnes County and ICE. Our management contract will generate approximately $15 million in annualized revenues.

In Indiana, we completed construction of the company-financed expansion of 512-beds to the New Castle Correctional Facility. The expansion will add approximately $8 million in annualized revenues under an extended management contract for the entire facility through June 2030.

Additionally, during the first quarter, our U.S. Corrections & Detention division continued the intake of inmates at the 1,500-bed Riverbend Correctional Facility in Georgia with the completion of the intake process expected this month.

Our contract with the Georgia Department of Correction marks our first project in this important market and is indicative of our continued growth at the state level.

In addition to these project activations, we are currently developing a 650-bed expansion to the 650-bed Adelanto ICE Processing Center in California, which is expect to be completed in July of this year. All of these projects are expected to generate returns that meet or exceed our targeted returns on capital.

As we look at the landscape of new growth opportunities, we continue to be optimistic regarding the outlook for our industry. Our diversified platform has enabled us to participate in a significant number of new opportunities.

Currently, the states of New Hampshire and Arizona have active procurements for new correctional facilities and correctional beds.

Internationally, the U.K. Ministry of Justice, known as MoJ, has an active procurement for the management of 9 existing prisons totaling approximately 6,000 beds.

We have recently submitted our proposals under this procurement, and we expect contract awards to be announced before the end of the year. We expect the MoJ will also begin another managed-only procurement of a similar or even larger size prior to year end.

The MoJ has also issued a procurement for the provision of electronic monitoring services covering all of England and Wales, which presently involves monitoring 25,000 individuals on a daily basis, making it the largest electronic monitoring contract in the world. BI, our U.S.-based electronic monitoring division, is actively participating in our efforts on this project.

Additionally, our diversified divisions within GEO Care continue to pursue several new business opportunities each in their respective markets. As you can see, there continues to be quality growth opportunities in our industry, and we remain optimistic regarding our future prospects.

We are also actively marketing our current beds in inventory and hope that our efforts will result in the reactivation of our idle facilities, which would significantly enhance our overall returns on capital.

We remain focused on the careful evaluation of our capital investments and the effective allocation of capital to enhance shareholder value. We will continue to evaluate appropriate investments in new projects, which meet or exceed our targeted returns on capital.

Additionally, we are focused on balancing our capital investments with the long-term goal to return value to shareholders.

As a result, today, we announced that our board has accelerated the declaration of our new quarterly cash dividend, which will now begin in the third quarter instead of the fourth quarter as previously announced. We also expect to increase our quarterly dividend to $0.15 per share starting in the fourth quarter.

Also in the last 2 years, we have executed significant stock buyback programs, which we believe resulted in enhanced value for our shareholders. Our dividend policy is indicative of our long-term view that we can return value to our shareholders while continuing to pursue quality growth and naturally delever through continued earnings growth and pay down debt.

In tandem with this strategy, we announced today that we have signed a definitive agreement to purchase a 100% of the partnership interest in the MCF nonrecourse debt structure, which will significantly increase our cash flows by approximately $155 million over the life of the MCF lease, substantially enhancing our ability to execute on our initiatives to return value to our shareholders. MCF has been a 2-year effort and we are very pleased that we've been finally successful.

We have always been focused on enhancing shareholder value and continue to believe that the underlying value of our company is not reflected in our stock price. Therefore, we have taken steps to more directly return value to our shareholders through share buybacks in the implementation of a quarterly dividend beginning in the third quarter.

But before I turn the call over to Brian, I'd like to briefly address another potential option we have decided to evaluate in our ongoing efforts to enhance shareholder value. We are in the process of engaging legal and financial experts to review the rules related to a reconversion and to evaluate the potential impact of a reconversion on our shareholders, our company and our long-term growth objectives.

Due to the preliminary nature of this process, it wouldn't be appropriate for us to comment on any specific details. However, it is important to emphasize that we intend to undertake a comprehensive analysis that will weigh the benefits, costs and risks of this alternative both in the short and long term.

Now I would like to turn the call over to Brian to review our financial performance and discuss our capital allocation strategy in more detail. Brian?

Thank you, George. Good morning, everyone.

As disclosed in our press release, we reported first quarter pro forma EPS of $0.31, which excludes $0.06 per share in after-tax start-up and transition expenses, international bid and proposal costs and M&A-related expenses. Our total revenues for the quarter increased to $412 million from $392 million a year ago.

Our company-wide adjusted EBITDA for the quarter grew to $74 million. Additionally, our adjusted funds from operations grew 23% to $58 million from $47 million for the same period last year.

Breaking down each of our reporting segments. Our U.S.

Corrections & Detention first quarter revenue increased to $246 million from $242 million a year ago. In comparison to first quarter 2011, our first quarter 2012 revenues reflect the activation of the new Adelanto California ICE Center in August 2011, the new Riverbend, Georgia correctional facility in December 2011 and the opening of the Karnes, Texas ICE project and the New Castle, Indiana expansion during the first quarter of this year.

These facility activations were offset by the deactivation of the Regional Correctional Center in New Mexico in the second quarter of 2011, our Leo Chesney facility in California in the third quarter of 2011 and our Desert View and Central Valley facilities in California in the fourth quarter 2011.

GEO Cares first quarter revenue increased to $110 million from $97 million in first quarter 2011, which reflect the acquisition of BI in February 2011 and the activation of the Montgomery County, Texas facility in March of 2011.

Our International Service revenue for the quarter increased to $57 million from $53 million one year ago. Finally, we did not have any construction revenues during the quarter.

Moving to our financial guidance for 2012. As disclosed in our press release, we have increased our earnings guidance for the full year and have issued our guidance for the second quarter.

We expect our full year 2012 revenues to be in the range of $1.65 billion to $1.66 million and our full year pro forma earnings to be in the range of $1.54 to $1.60, exclusive of $0.12 per share in start-up and transition expenses, international bid and proposal costs and M&A-related expenses.

Our 2012 adjusted EBITDA is expected to be in the range of $330 million to $340 million. Our second quarter revenues are expected to be in the range of $410 million to $415 million.

And our pro forma earnings per share are expected to be in the range of $0.40 to $0.42, excluding $0.03 per share in start-up and transition expenses, international bid and proposal costs and M&A-related expenses.

Our updated guidance for 2012 reflects our recent announcement of the continuation of the Golden State Community Correctional Facility in California through December 14, which was previously scheduled to close on July 1.

Our guidance also assumes that our managed-only contracts in Mississippi for the East Mississippi, Walnut Grove and Marshall County facilities are transitioned in the second half of the year following the state's decision to competitively rebid these contracts.

Additionally, our guidance does not reflect the potential reactivation of our remaining idle facilities although we are actively marketing these facilities and remain hopeful of -- our efforts will result in the reactivation of a number of these facilities.

As a reminder, our guidance includes approximately $0.14 per share of carrying costs for our idle facilities totaling 7,000 beds. More than 1/2 of these carrying costs are noncash expenses.

Our earnings guidance also reflects approximately $0.18 per share in intangibles amortization expense primarily related to the acquisitions of Cornell and BI, and our facility depreciation expense is expected to be approximately twice as large as our normalized level of maintenance CapEx of $30 million to $35 million.

As we have expressed to you in the past, due to these large noncash expenses, we think that our adjusted funds from operations is an important measure of our company's strong cash flows and underlying profitability. We expect our 2012 adjusted funds from operations to be approximately $195 million to $205 million or $3.18 to $3.34 per share.

With respect to our adjusted funds from operations, we expect to make mandatory debt repayments on the long-term loans -- on the term loans associated with our senior credit facility and on our nonrecourse debt of approximately $30 million in 2012.

Our current projects under development have been substantially completed. Our total project CapEx in 2012 is expected to be approximately $100 million, of which $50 million has been spent during the first quarter.

We also expect to complete the purchase of the MCF partnership interest for $27 million during the third quarter of 2012. The balance of our adjusted funds from operation will be used to fund approximately $15 million in dividends or $0.10 and $0.15 per share in the third and fourth quarters, respectively, and repay debt.

Looking forward to our adjusted funds from operations in 2013, we will have mandatory debt repayments on the term loans and on nonrecourse debt of approximately $45 million. Additionally, we expect to make various facility enhancements and improvements of approximately $15 million to $25 million in 2013.

With our available borrowing capacity cash on hand and strong adjusted funds from operations of approximately $200 million annually, we will have adequate liquidity to execute our strategic growth and return cash to our shareholders.

As George mentioned, we will continue to invest in capital projects with underlying contracts that meet or exceed our targeted returns on capital. We do not expect to speculatively build and will only pursue new build-to-suit projects with contracts in place.

We will also continue to have a balanced approach to meaningfully return value to our shareholders through a combination of cash dividends and opportunistic share buybacks. We have a proven record of enhancing shareholder value through the implementation of share repurchase programs, which we believe have resulted in enhanced value for our shareholders.

We currently have approximately $25 million remaining under the stock buyback program authorized by our board. Additionally, our board has committed to more directly returning value to shareholders in the form of cash dividend payments.

We have accelerated the timing of our new quarterly cash dividend declaration to the third quarter. We will also increase our quarterly dividend to $0.15 per share starting in the fourth quarter.

Our dividend policy reflects our long-term view that we can return value to our shareholders while continuing to pursue quality growth and naturally delever. While we don't believe our leverage level is uncomfortable, we are committed to bringing our leverage down through earnings growth and debt paydown.

Based on current capital commitments, mandatory debt repayments and expected uses of cash, we expect to reduce our recourse debt leverage to 3.5x by the end of 2013.

Our mandatory payments, along with our continued earnings growth, will result in the continued de-levering of our company. Additionally, we may make further modest debt paydowns balanced against the interest rate environment.

I will echo George's comments that given our strong and predictable cash flow generation, we continue to believe that the underlying value of our company is not reflected in our stock price. I would also reiterate that we have continued to look for ways to enhance shareholder value as reflected by our recent share buybacks over the last 2 years and our new dividend policy.

As George mentioned, we have begun a process to review the rules related to a reconversion and the potential impact on our shareholders, our company and our long-term growth objectives. We are in the process of engaging outside legal and financial experts to conduct this review.

Given the early stages of this review, it wouldn't be appropriate for us to comment on any specific details. However, we and our board are committed to undertaking a thorough review of the potential benefits, costs and risks involved.

With that, I will turn the call to John for an update on GEO Corrections and Detention. John?

Thanks, Brian. Good morning, everyone.

I'd like to address our business development efforts for GEO Corrections and Detention. I'll start with the federal market segment and the 3 federal government agencies that we serve: The Federal Bureau of Prisons, United States Marshals Service and Immigrations and Customs Enforcement or ICE.

With regard to our recent project activations at the federal level, we recently activated our new 600-bed Civil Detention Center in Karnes County, Texas under an intergovernmental agreement between Karnes County and ICE. This $32 million company-owned facility is expected to generate approximately $15 million in annualized revenues.

Last August, we opened the 650-bed Adelanto ICE Processing Center eased through an intergovernmental agreement between the city of Adelanto and ICE. We are currently in the process of completing a new $70 million, 650-bed center adjacent to the existing one and expect to begin the intake of detainees at the new center in August of this year.

At 1,300 beds, the Adelanto ICE detention complex is expected to generate approximately $42 million in annualized revenues. Additionally, our GEO Transport division is currently competing on 2 solicitations issued by the federal government for the provision of secure transportation services or ICE in the Dallas, Texas sector as well as throughout the Southwest border for The Customs and Border Protection agency.

These 2 opportunities are the largest prisoner transport opportunities in the United States.

Now I'd like to turn to the state market segment. As states across the country continue to face budgetary pressures, their ability to achieve cost savings becomes an even more important priority, which leads to increased interest in prison privatization projects.

Many of our state clients require additional beds as inmate populations continue to increase and aging inefficient prisons need to be replaced with new more cost-efficient facilities. With regards to our recent project activations, we completed construction and activated our new $80 million company-owned, 1,500-bed Riverbend Correctional Facility in Georgia this past December and are continuing to ramp up the facility.

We expect the 1,500-bed facility to generate approximately $28 million in annualized operating revenues. We expect the prisoner ramp-up to be completed this month.

In Indiana, we completed construction and have now activated the 512-bed expansion at the New Castle Correctional Facility under an agreement with the Indiana Department of Corrections. GEO funded the $21 million expansion, which is expected to generate an additional $8 million in annual operating revenue.

With regard to contract discontinuations, we recently announced our decision to discontinue the management contract for the East Mississippi Correctional Facility located in Meridian, Mississippi effective July 19. The Mississippi Department of Corrections has decided to competitively rebid our managed-only contracts for the Walnut Grove and Marshall County facilities, along with the East Mississippi facility as a package.

As Brian mentioned, our guidance now assumes that our managed-only contracts for these facilities are discontinued in the second half of this year.

Turning now to new state solicitations, we remain optimistic about the new growth opportunities in our industry. The states of New Hampshire and Arizona have pending procurements totaling approximately 3,700 beds.

As you may recall, the state of Arizona has a pending RFP for up to 2,000 in-state beds, and we expect a contract award in the second half of this year. In New Hampshire, the state issued the RFPs for the development and management of separate male and female facilities or a combined hybrid male and female facility totaling 1,500 to 1,700 beds.

The procurement allows for the development of new facilities or the renovation and expansion of existing facilities. We expect an award under this procurement in the second half of this year.

In California, the Department of Corrections & Rehabilitation has issued a bed utilization plan that would increase the use of community correctional facility beds beginning next year. The plan also calls for increased use of community supervision programs.

We currently have more than 2,200 community correctional facility beds in inventory in California, and we will continue to monitor the state's proposed plan.

Next I'd like to update you on our international business development efforts. In the U.K., the Ministry of Justice has issued a procurement to privatize 9 existing public facilities, which total approximately 6,000 beds.

We have submitted our proposals under this procurement and expect contract awards to be announced in the fourth quarter of this year. Under the procurement, companies were permitted to bid on up to 6 of the 9 prisons and can be awarded long-term contracts of 7 to 15 years for the management of no more than 5 prisons.

One of the 9 prisons is currently managed by a private operator with the remaining 8 prisons operated by the public sector. The facilities range in size from 260 beds to more than 1,100 beds.

This procurement is intended to be followed by another solicitation involving 10 to 15 managed-only prisons.

In Australia, the state of Victoria has awarded a contract to our Pacific Shores Healthcare subsidiary for the continued provision of correctional health care services in the state's public prisons.

As you can see, we are actively pursuing several meaningful opportunities in each of our core markets and we remain optimistic about our industry and are enthusiastic about our position within that industry.

At this time, I'll turn the call over to Jorge Dominicis for a review of GEO Care.

Thanks, John. Good morning.

Each of our GEO Care divisions continues to pursue several new growth opportunities. Our residential treatment services subsidiary is currently competing on several formal procurements.

In Texas, the State Department of Health has issued a request for proposals for the operation of an existing state forensic hospital. In the RFP, the state has identified a number of existing state hospitals that can be proposed and the state will select one facility to be privatized.

In North Carolina, the state is in negotiation with GEO Care for the provision of a 90-bed forensic hospital, which we expect will result in a contract award this year.

In Virginia, we submitted an unsolicited proposal for the management of the state's sexually violent predator treatment facility involving approximately 250 beds. The state has decided to move forward with this process and is expected to make a contract award by July 1 of this year.

In addition to these states, Georgia, Louisiana, South Carolina, Pennsylvania and others have indicated a desire to privatize state psychiatric hospitals or treatment centers.

Our community-based services division expects to compete for several formal solicitations from the Federal Bureau of Prisons for residential, community-based reentry centers across the country.

Additionally, we're working with our existing local and state correctional clients to leverage new opportunities in the provision of community-based reentry services in both residential facilities as well as in our non-residential day reporting centers, which have continued to show significant growth potential.

Our youth services division continues to work towards maximizing the utilization of our existing asset base. We have undertaken a number of marketing and consolidation initiatives to increase the overall utilization of our existing youth services facilities in states like Pennsylvania, Ohio, Illinois, Texas and Colorado.

We're optimistic these efforts will continue to improve the utilization of our youth facilities and our overall financial performance.

Finally, our BI subsidiary continues to market its supervision in electronic monitoring services to local state and federal correctional agencies nationwide. BI is the world's largest electronic monitoring service provider with the provision of monitoring services and devices for approximately 70,000 individuals.

We expect a number of correctional agencies across the U.S. to increase the use of electronic monitoring technologies to supervise offenders who have been placed under community supervision.

In the U.K., we're participating with GEO U.K. in a procurement involving the provision of electronic monitoring for all of England and Wales.

This procurement involves monitoring and field support for approximately 25,000 individuals on a daily basis under a single service provider contract. Financially, it represents the largest single electronic monitoring contract opportunity in the world.

We will be submitting a proposal to the MoJ through GEO U.K. with BI providing the necessary technical assistance.

With regard to BI's ISAP contract with ICE, the President's recommended budget for fiscal year 2013 reflects a 40% to 50% increase in funding for the BI ISAP contract. We're closely monitoring the appropriations process in Congress and hope that this proposed expansion of the program will be approved.

At this time, I'd like to turn the call back to George for his closing remarks. George?

Thank you, Jorge. We are very pleased with our first quarter results in our core operations in the U.S.

and internationally, which continue to deliver solid operational and financial performance. Our industry continues to experience overall positive trends with significant growth opportunities in the states like New Hampshire and Arizona as well as the United Kingdom.

We remain focused on effectively allocating capital to enhance value for our shareholders. As we've discussed today, we will continue to carefully evaluate new capital projects, which meet or exceed our targeted returns and which will continue to more directly return value to our shareholders through opportunistic share repurchases as well as quarterly cash dividends.

We've accelerated the declaration of our new quarterly dividend, which now will begin in the third quarter, and we've decided to increase our quarterly dividend to $0.15 per share beginning in the fourth quarter. Our dividend policy is indicative of our long-term view that we can return value to our shareholders while continuing to naturally deleverage and pursue quality growth.

We believe that these efforts will continue to enhance value for our shareholders and reduce our overall cost of capital. We also believe that our diversified growth and investment strategy have positioned GEO as the leading provider of corrections, detention and treatment services through a GEO continuum of care that can deliver performance-based outcomes and significant cost savings for our clients worldwide while continuing to enhance value for our shareholders.

As I've expressed to you in the past, we view all of the different initiatives to enhance shareholder value as complementary. None are pursued to the detriment of the others.

This concludes our presentation. We would now like to open the call to your questions.

Two questions. The first one is on the electronic monitoring bid in the U.K., I just wanted to get some more color, if possible, on -- if you guys are teaming up with somebody else?

Is there any subcontractors? Just curious on how positioned you are because I think BI is predominantly U.S., so how leverageable is that internationally?

The prime bidder in the procurement for electronic monitoring will be GEO U.K. and it is joined with the subcontractor, GEO Amey, which has the core transfer contract, which is called PECS, which covers 80% of the country.

So I think we are well-positioned to compete very effectively.

So from a monitoring angle, though, I mean don't you need a monitoring base station? Is that already part of what the transportation contract is?

No, we have monitoring contracts in our GEO Amey prisoner transport contract. But this opportunity would require the establishment of a new monitoring station.

The procurement really is a complete reengineering of the current services, which are provided by 2 vendors in 4 different contract geographical areas. The new opportunity would be to consolidate everything into one call center with all of England and Wales as the geographic area.

So everybody has to kind of start from scratch and work with a clean page to provide...

The other question I have was in terms of the dividend announcements like

[Technical Difficulty]

I want to ask about Michigan. What's -- can you kind of tell us what the latest is there with respect to that bill or bills moving through the legislative body?

Well, there's a bill in the Senate and I think that there are still attempts being made in the House to have a companion bill for authorization to issue an RFP to effectively privatize 1,750 beds, but it still has not yet occurred.

Okay. And so any -- and do you expect that whole situation to get cleaned up with the budget process this year, so maybe mid-year we'd have some resolution on that?

We would, hopefully -- would be resolved in conference committee.

Conference committee, so that's leading up to the end of the month then, I guess, or the end of this month or next month?

I think it's the end of this month.

Okay. Then I want to get your sense, George, on California.

When do you think we'll have better visibility on the intent of the state to use those 2,200-plus community corrections beds that you have vacant in California? Will we really only get the kind of visibility on that situation come November when they vote on the tax proposal that Brown has there?

It's probably a fall timing. I mean it's certainly after the budget's been passed, which is always late.

And then the vote on whether there'll be more income generated for the various state programs that Brown has put in effect. And I think that's a fair reading of the timing.

Okay. And then one more before I jump, so you got me -- with the MCF announcement this morning, you got me thinking about the different properties that are included in MC -- Moshannon Valley is one of those facilities that's included in that, is it not?

Yes, it is.

No, it's not.

It's not?

No.

Our lines dropped a couple of times so I apologize if you've already answered them, but I did want to get some clarification on a few things. Can you confirm whether or not you guys have looked at a TRS structure before?

We have not.

Okay. And does the -- presumably, it's too early to tell in your analysis sort of the various pros and cons of the structure?

Yes, it this.

Okay. And the buyout today with MCF, how, in your view, does that potentially help with any potential sort of conversion?

It was just coincidental as I said in my prepared comments. It's been a 2-year effort ever since we bought Cornell.

Actually, I think we started even before we bought Cornell, so it's just coincidental that we finally concluded a definitive agreement.

Okay, great. And then I was hoping -- I missed, John, all your comments on sort of the state analysis.

Could you just give me your thoughts on the CDCR plan, the probability of enactment, which of your CCFs you think are sort of most appropriate and then also any update you have on Michigan?

Well, this is Jorge, I think I handled those questions with the previous caller. On California, I think we said that a fall timing is probably a fair reading of how long it's going to take before things shake out in the budget and as far as additional revenues for the governor's various programs to determine what they're going to do about the use of in-state beds.

But I think it's a fair reading of the CDCR's own plan that their intent and desire is to bring out-of-state prisoners back into state and we obviously have some bed space in-state, in excess of 2,000 beds. And we're very pleased that Golden State has been continued and we're hopeful of a successful renewal and we're hopeful of a reactivation of our other facilities over a period of time.

Are there any ones in particular that make a little bit more sense for the CDCR versus -- I know you have another one in Adelanto that maybe was more appropriate you thought for ICE. Any thoughts on that or really all of them are available?

Well, all of them are available as of today, but we're marketing to multiple governmental jurisdictions. It's first-come, first-served.

And any thoughts on Michigan and sort of what's going on there?

They're still in session and we're hoping -- there is certainly a bill in the Senate we're hoping that eventually a companion bill will emerge out of the House before the end of the session.

Okay. And your profitability on your equity earnings of affiliates sort of turned.

It was negative last quarter, I think, because of the transport contract ramp-up turned positive again. Should we expect it to -- was the first quarter number the run rate we should expect going forward?

Should the profitability increase? Is there still some room for improvement on that transport contract?

Well, we're still -- as we said during, I think, the last conference call, we probably didn't talk about it as much during this call, that contract, for a number of different reasons, we expect to be in sort of an extended start-up and transition mode during this year. But as we progress into the second half of the year, we would expect that the start-up losses will decline and turn to profit in the later part of the year.

So the switch from sort of 4Q or the loss of $800,000 to a gain of $700,000 in first quarter, was that driven by better performance in South Africa?

No, I think there's just some -- there's some decline in the amount of start-up expenses, but we still have losses overall or breakeven sort of in the U.K. and then South Africa is doing well.

Okay. And just sort of last question.

Any general comments on state budgets and most of them are generally wrapped up at this point, but any particular proposals that are positive or negative for you from your customers?

There are no negative situations that come to mind and there's a few potentially very positive situations.

This is actually Frank in for Tobey. I wanted to ask you quickly.

I guess you talked about the funding environment on the electronic monitoring side in the U.S. Can you give us any more color in terms of the growth rate there or time horizon?

Just what are you seeing generally in that market?

The electronic monitoring continues to grow. There's a lot of interest from 8 municipal agencies expanding the use of that technology.

And we think in this last quarter versus where BI was last year, we had a good growth. I mean, it was probably in the range of something like 10% on the electronic monitoring side.

Okay, great. And is it possible to quantify the foreign currency impact, international for the quarter?

It'll be in the Q, but it wasn't significant. I don't think the rates fluctuated that significantly during the quarter.

Okay, great. And are there any particular contacts -- contracts up for renewal as you see that either there's some either population issue or anything that would stick out?

No significant renewals this year, no.

We have a competitive procurement in the U.K. on a small immigration facility.

I just want to understand kind of what drove the decision to boost the dividend by 50% and then just obviously accelerate it, I understand, but just -- was it the guidance that just kind of gave you the confidence to take the dividend that much -- boosted that much would be helpful.

Well, I think we got better visibility on our financial performance for the -- starting at the beginning of the second half of the year. And with our new facilities coming online and the continuation of Golden State and the possibility that other California facilities could be reopened, so we felt more confident about the improving financial performance of the company.

Got it. And just switching gears to the REIT.

I know it sounds like it's still early in the process, but do you have any sense of timing on that? And who you would engage to kind of shepherd you through the process here?

We really haven't even started the process, so I can't tell you about the timing and we haven't engaged anybody as yet.

I wondered how we should think about the remaining share repurchase authorization here in light of the increased dividend?

Well, it's still available to us. So we have, I think, we said $25 million.

And we are opportunistic buyers. If there's a time where we think it makes sense, we will act on that and it's our option.

Okay. And one last question here, George, I just wanted to understand the international opportunity for the electronic monitoring.

It's nice to see the development there in the U.K. But just wondering beyond that, what type of other opportunities you guys might have and how we should think about just the capital requirements for monitoring stations and all, as you might think about expanding that service?

There's been some other countries that have expressed interest in expanding in that area. I think Australia is one of them, and I think that U.K.

is first. And if we have the outcome that we're gearing up for, it'll have strong implications for us in other countries where we're doing business.

I wanted to ask about the MCF transaction that's working? You've got a net liability on the balance sheet of $57 million.

It sounds like 10 of those restricted funds -- $10 million of those will be going to the owners. So after the deal is done -- if the deal was done right now, the net liability would go to $67 million.

Do I understand that right?

Well, on our balance sheet right now it's accounted for as an owned property, owned asset. So there's no -- we don't reflect on our balance sheet, if you will, the partnership's balance sheet.

But because of the way we already account for MCF, there won't be any change in the accounting for the -- on our books. So the $10 million payout that's going out to the partners, that is money under the partnership agreement or the structure as it was already set up that would have gone out to them anyways.

So that's really not a change and the impact of that would be as it would have been whether we bought them or not.

But the $10 million of restricted funds are on your balance sheet now and if the deal were to close tomorrow, it would not be on your balance sheet?

It may or may not be. It depends on if they're able to accelerate taking those out.

If they're not, then the $10 million will stay until the trustee allows those funds to be distributed. So there's a mechanism -- there's a sort of a waterfall process in the MCF agreement that says how those funds get distributed out.

And there's a belief by the parties that, that may be able to accelerated, but it will require trustee and rating agency agreement. So it's not certain that, that will occur.

But ultimately, that money will be distributed to the previous partners. And when it does, it will have that impact.

What it will be exactly, I don't know because I don't know the timing of it and debt is obviously being paid down over time as well.

But will all the debt be paid by 2016?

That's right.

In the lease that will go away, right now, I believe you're paying $25 million a year until August 16 and then it drops to, I believe, just $160,000 a year for the next 5 years. And then after that, it would be at your option for the next 25 years?

The lease doesn't necessarily go away. The partnership doesn't necessarily go away.

But the ownership interest in the partnership will rest with The GEO Group, the bankruptcy remote, nature of the structure and the project financing structure remains in place. So when the bonds are paid off in 2015 or '16, as you mentioned, the amount of payments for debt service amortization is about $25 million right now for principal and interest.

That will decline -- that will go away completely and there's a modest rent, almost like a free rent period of 5 years' worth, as you indicated, about $160,000. And then it steps up to about approximately $10 million a year if we were to renew the leases on all of the properties.

That's how the current structure and lease agreements are situated.

But under the purchase of MCF, we would have no rent payments.

Well, we would still have the rent payment, but we would own it 100%. So it would eliminate in consolidation, but the rent payment would in theory still exist.

Okay. The $10 million a year, that's for starting in 2021, that's for how many years?

It adjusts every year after that. There's a schedule in the rent agreement.

So there's rent for -- through 2046.

Okay. And how do we get to the $155 million in -- voided lease payments?

How do I get to that?

It's the sum of all the cash flows and tax benefits between our estimated date of closing in the, call it, the second or the third quarter of this year through to the end of the agreement except for the $10 million that goes out to the current owners of the partnership or the current partners.

The $25 million a year for the next 4 years is $100 million. Then you've got 5 years of virtually free rent.

And then after that, it's at your option. So we've only identified about $101 million before that option.

You got $54 million for the next 25 years?

Well, you have -- starting with the rent payments that start in 2021, there's 25 years of rent payments that start out at $10 million a year. So they decline some, but that's over time, but that's where the bulk of that's coming from.

25 years at an average of probably $6 million to 7 million a year.

So what I was missing is the tax effect of all this. In other words, the $155 million is an after-tax number?

It includes the tax benefit, that's correct.

Okay. Now that's what I was missing.

Secondly, your adjusted EBITDA number of $330 million to $340 million, obviously does not include interest tax and depreciation. What else are you excluding to get to that number?

In adjusted EBITDA?

Yes.

A couple of different things. Stock compensation, noncash compensation expense.

That's probably the other major item. And then we also add back some of our pro forma start-up adjustments.

The start-up adjustments of about $12 million and the stock comp was what, about $7 million?

It's about $6 million or so. It's actually, I think there's -- well, we don't have a table for the full year but you could get a good sense of it from looking at our reconciliation tables from 2011 for the full year and the first quarter this year.

Brian, how much in start-up are we expecting in Q2?

$0.03 worth, probably about half of that is start-up and the rest of it's bid and proposal costs for the U.K.

Okay. And then, just thinking about the continuum of care concept that you guys were really putting hard out there in the marketplace.

I think Florida was the primary piece of business that you were chasing that really had that concept as a relevant concept. Are there other pieces of business where the continuum of care notion is something that's really important you think or a really big selling point from your perspective?

Well, it is in the U.K. competition because there is a grouping of prisons, 3 prisons, that are being bid as under one contract, and we have proposed the continuum of care for those 3 prisons.

Okay. George, and when you say continuum of care market, I mean, what conception -- what are the service elements within GEO today that you kind of include in the continuum of care concept?

I'm not sure I really want to discuss that in an open competition because that's part of our proposal.

Okay, because -- but I guess it means different things in terms -- when you...

It does mean a different thing at the company level, meaning that we have different business units that provide different services that, taken collectively, provide a continuum of care. But when you reduce it down to the facility level, it is a different concept.

Okay. Let me just ask it a different way then.

If I were to suggest that the continuum of care concept probably in most all circumstances that you're looking at from a new business perspective at this point includes the adult secure incarceration services, so kind of the core services of the company; the electronic monitoring services; transportation services; and perhaps some rehabilitation/community correction services. Would that pretty much encompass the continuum of care concept as you guys think about it today?

At the company level, not at the facility level. It gets more detailed at the facility level.

Okay. But broadly speaking, those are the service elements?

Yes, and reentry as Jorge has pointed out.

Okay, we thank you for your time today and look forward to addressing you at our next quarterly conference call. Thank you.