Q4 2020 Geo Group Inc Earnings Call
[music].
Good day and welcome to the Geo group fourth quarter, 'twenty and 'twenty earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.
To withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Pablo Paez Executive Vice President of corporate Relations. Please go ahead Sir.
Thank you operator.
Morning, everyone and thank you for joining us for today's discussion of the Geo group's fourth quarter and full year 2020 earnings results with US today are George the only chairman and Chief Executive Officer and powder Brian.
Brian Evans, Chief Financial Officer, Ann Schlarb, President of Geo care, and Blake Davis President of Geo secure services.
This morning, we will discuss our fourth quarter and full year results and our outlook. We will conclude the call with a question and answer session. This conference call is also being webcast live on our Investor website at investors day Geo group Dot 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 the supplemental disclosure we issued this morning and.
Additionally, much of the information we will discuss today, including the answers. We gave 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 are AG.
<unk> results may differ materially from those and the forward looking statements as a result, and 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 Zone, George Thank you Pablo.
And good morning to everyone today, we reported our fourth quarter and full year 2020 results and issued our final guidance for 2021.
During the fourth quarter, our operating divisions continued to face challenges associated with the one good thing.
COVID-19 pandemic.
Over the course of the pandemic, we experienced a decline in overall occupancy levels at several of our federal facilities.
Due to the decline in overall federal population, we had previously announced that the Federal Bureau of prisons had decided not to renew three of our <unk> contracts that are scheduled to expire during the first quarter of 'twenty 'twenty one.
More recently, the President issued an executive order directing the attorney general to not renew Doj contracts with privately.
Operating criminal detention facilities.
While we continue to monitor the scope and implementation timeline for disorder, we have assumed that it could result in additional non renewals of our <unk> contracts in 2021 and coming years and we have incorporated this assumption into our guidance.
Unlike the B O P. U S. Marshals service, which is also under the U S Department of Justice does not own and operate facilities.
The U S marshals service contracts for bed capacity, which is generally located in areas near federal courthouses to house pre trial offenders, who have been charged with federal crimes under the law is passed by Congress.
The U S marshals service contracts for these facilities primarily.
Contracts, primarily for these facilities through Intergovernmental service agreements.
And to a lesser extent and direct contracts.
And the U S. Marshal service may determine to conduct a review of the possible application of the executive order on its facilities.
Our Geo care segment has also been impacted by lower occupancy levels across our reentry centers day reporting programs and youth services facilities due to COVID-19.
During the fourth quarter, we incurred a noncash goodwill impairment charge associated with our reentry centers, primarily due to the negative impact of the pandemic had on this segment.
Despite these challenges we believe our company remains resilient and is underpinned by long term real estate assets and supported by contracts and tailing essential government services.
We have provided these essential services to government agencies at the federal and state levels under both Democratic and Republican administrations and during times when either party has been in control of the Legislative branch of the government.
Our frontline employees remain focused on providing high quality services and humane here for all of those entrusted to us.
During the past year, our employees have shown incredible commitment and resilience as our company has managed through unprecedented and at times and we are very proud of their dedication.
From the outset of the pandemic, we have implemented company wide steps to mitigate the risks of COVID-19 to all of those in our care and our employees and we continue to evaluate these steps.
Ensuring the health and safety of all of those in our facilities and our employees has always been our number one priority.
We also recognized and and in addition to the challenges associated with COVID-19 heightened political rhetoric has led to a mischaracterization of our role as a government services provider and has created concerns regarding our future access to financing.
Our board of.
Directors and our management team are aware of the importance of allocating capital to pay down debt in the current environment.
Consistent with our previous guidance, we paid down approximately $100 million and net debt during 2020.
To continue our focus on paying down debt our board recently reduced our quarterly dividend payment to <unk> 25 per share for the quarter.
Our board will continue to evaluate our dividend and capital allocation strategy, including our planned capital expenditures with the goal of targeting a minimum of $75 million to $100 million and net debt repayment in 2021 and annually thereafter.
Additionally, we continue to evaluate cost savings opportunities at the corporate and facility levels and we have identified several company owned assets that could potentially be sold.
We remain committed to balance our continued creation of value for our shareholders with prudent management of our balance sheet at this time and I'll turn the call over to Brian Evans to review, our financial results guidance and liquidity position.
Thank you George Good morning, everyone. Today, we reported fourth quarter revenues of approximately $578 million and net income attributable to geo of <unk> <unk> per diluted share.
Our fourth quarter results, reflecting non cash goodwill impairment charge of approximately $21 million.
This goodwill impairment charges associated with our community based reentry centers, which have been negatively impacted by the COVID-19 pandemic.
Our fourth quarter results also reflect a $5 $7 million pre tax loss on real estate assets at $2 $3 million pre tax gain on extinguishment of debt and $2 5 million and pretax COVID-19 related expenses.
Excluding these items, we reported fourth quarter adjusted net income of 33 per diluted share.
We also reported fourth quarter <unk> of <unk> 62 per diluted share.
Moving to our outlook for COVID-19 pandemic continues to have a negative impact on several segments of our company and <unk>.
Endemic has resulted in lower occupancy levels at several of our facilities and programs beginning last March and continuing through the end of 2020.
As we have previously disclosed the Federal Bureau of prisons has decided that it will not renew our contract for the D. Ray James Georgia River is North Carolina, and motion and Valley, Pennsylvania facilities due to the decline and the federal prison populations more recently as a result of the Covid pandemic.
The D Ray James facility contract expired on January 31, and the two other contracts are set to expire on March 31, and our garden our guidance for 2021 accounts for these explorations.
Additionally, the administration has issued an executive order directing and the U S attorney general to not renew Doj contract with privately operated criminal detention facilities.
While we continue to monitor the scope and implementation timeline of disorder, our guidance presently accounts for the potential non renewal of three additional DLP contracts that have option periods expiring in 2021.
The COVID-19 pandemic has also resulted in lower occupancy levels across our other federal reentry and used facilities are 2021 guidance assumes the continued impact of COVID-19, and the first part of the year with a slow recovery to more normalized operations by the by year end.
Our guidance also reflects the activation of our three ice annex facilities in California, and our U S. Marshals facility in Eagle Pass, Texas, which began last year, we expect to achieved normalized operations at these for facilities over the course of 2021.
Taking all these factors into account, we expect full year 2021, net income attributable to geo to be and a range of 88 to 98 per diluted share on total revenues of approximately $2, two 4 billion to $2 $2 $7 billion we.
<unk> full year 2021, apple to be and a range of $1 98 to.
For $2 eight per diluted share and we expect full year 2021, adjusted EBITDA to be and a range of 386 million to $400 million.
For the first quarter 'twenty and 'twenty, one we expect net income attributable to geo to be and a range of 18 to 20 per diluted share and quarterly revenues and 579 million to $584 million and we expect first quarter 2021, and Apple to be between 48, and <unk> 50 per diluted share.
Moving to our capital structure at the end of the fourth quarter, we had approximately $284 million and cash on hand, and approximately $136 million and borrowing capacity available under our revolving credit facility. In addition to an accordion feature of $450 million under our <unk>.
That facility.
With respect to our capital expenditures, we expect total capex from 2021 to be approximately $104 million, including $26 million for maintenance, Capex and $77 million and growth Capex are.
Our estimated growth Capex for the year includes $32 million to upgrade our <unk> electronic monitoring devices to the new <unk> cellular network and $45 million for facility Capex.
To continue our focus on paying down debt, our board reduced our quarterly dividend payment to <unk> 25 per share last month.
From 2020, we paid down approximately $100 million and net debt consistent with our prior guidance.
Our board will continue to evaluate our dividend and capital allocation strategy, including our planned capital expenditures with the goal of targeting a minimum of $75 million to $100 million and net debt repayment in 2021 and annually thereafter.
Additionally, we continue to dialogue with our lenders and creditors and are monitoring credit market conditions. We are also continuing to evaluate potential cost savings opportunities as well as the potential sale of a number of company owned assets.
During the first quarter of 2021, we completed the sale of our interest and the Talbot Hall reentry facility with net proceeds of approximately $13 million at this time I'll turn the call over to Blake Davis for a review of our Geo care services Geo secure services segment.
Thanks, Brian and good morning, everyone I'd like to provide you a brief update on the 2020 operational highlights for our Geo secure services business unit over the last 12 months, our operational efforts have been focused on implementing mitigation strategies to address the risks associated with COVID-19 pandemic.
From the start of the pandemic, we began taking steps at our facilities to implement best practices consistent with the COVID-19 guidance that was issued for correctional and detention facilities by the centers for disease control and prevention. These.
These practices included the implementation of quarantine cohort ing and medical isolation procedures. We also have provided educational guidance to our employees and the individuals in our care on the best preventative measures to prevent the spread of COVID-19.
We have continuously exercised paid leave and paid time off policies to allow our employees to remain at home if they exhibit flu like symptoms or to care for family members.
We remain focused on implementing increased sanitation measures and deploying personal protective equipment, including face masks for all employees and all of those and our care.
We have also taken steps to increase testing at our facilities, including the deployment of Abbott rapid test devices, we have administered over 51000, Covid tests and our facilities at the close of 2020.
We continuously evaluate these steps and we'll make adjustments based on updated guidance by the CDC and other best practices.
Despite the unprecedented challenges associated with the pandemic, our frontline employees have remained focused on providing high quality services and delivering humane and compassionate care for all of those in our facilities during 2020, our employees and facilities achieved several important milestones.
Jones, our facility successfully underwent 100 audits, including internal audits government reviews third party accreditation and certification under the prison rape elimination Act.
Our medical services staff undertook over 350000 quality health care related encounters including intake health screenings sick calls and off site medical visits.
During the year, we achieved over 42000 employee training completions and our GTI Transportation Division safely completed over 14 million miles driven we are incredibly proud of our employees for their dedication and daily commitment to operational excellence.
Before I turn the call over to and I'd like to address the recent executive actions that have been announced by the new administration at the federal level.
Last month, the President issued an executive order directing the attorney general to not renew Doj contract with privately operated criminal detention facilities.
While we continue to monitor the orders scope and implementation timeline as we've noted and our recent announcements. The bureau of prisons has experienced a decline and federal populations more recently due to COVID-19.
As a result, the <unk> previously announced that it would not renew or rebid three of our existing contracts with the agency the contract at our D. Ray James Georgia facility ended on January 31.
And our contracts at our rivers, North Carolina, and motion and Valley, Pennsylvania facilities expire on March 31.
We have three additional company owned facilities contracted with <unk> that have current option periods expiring in 2021 are great Plains, Oklahoma facility at the end of May and our Big Spring and flight line facilities in Texas at the end of November.
Given the President's executive order and the decline and federal prison populations. We are preparing operationally for the potential that additional contracts with the bureau of prisons may not be renewed with their current option periods expire.
<unk> owns and operates approximately 90% of the beds housing federal inmates and since the late 19 nineties.
<unk> has used contractor operated facilities as the swing capacity needed to deal with overcrowding conditions and the federal prison system.
Contractor operated facilities have historically been used by the bureau of prisons to house almost entirely non U S citizen criminal aliens, serving sentences for federal crimes committed in the United States.
Unlike the.
The U S. Marshals service, which is also under U S Department of Justice does not own and operate its facilities.
The U S Marshal service contracts for bed capacity, which is generally located in areas near federal courthouses to house pretrial offenders, who have been charged with federal crimes under laws passed by Congress.
The U S Marshal service contracts for these facilities, primarily through Intergovernmental service agreements and to a lesser extent direct contracts. The U S. Marshal service may determine to conduct a review of the possible application of the executive order and its facilities.
Administration has also taken several executive actions related to immigration. However at this time there had been no direct is related specifically to enforcement or detention policies earlier. This month, the president signed an executive order, establishing and inter agency task force and the reunification of families to <unk>.
<unk> migrant miners separated from their families. As we have publicly stated in the past we do not manage any facilities that house unaccompanied migrant miners are ice processing centers are highly rated by national accreditation organizations and provide high quality culturally responsive.
Services, and a safe and humane environment.
Typical amenities at our centers include flat screen Tvs and the housing areas multipurpose rooms, outdoor covered pavilions and artificial turf soccer fields.
All of those and trusted in our care are provided culturally sensitive meals are per.
By registered Dietitian clothing, 24, seven and access to healthcare services and full access to telephone and legal services.
Health care staffing at our ice processing centers is approximately double than that of our state correctional facilities, which is needed to provide appropriate treatment for individuals who have numerous and diverse health and mental health needs.
We have provided high quality services for over 30 years under Democratic and Republican administration, including eight years under President Obama's administration.
And we welcome the opportunity to find ways to improve and deliver at the delivery of services and accountability at ice processing centers.
At this time and we will turn the call over to Ann for a review of Geo care. Thank you Blake and good morning, everyone I'd like to briefly review the 2020 operational highlights for our Geo care business unit consistent with the efforts undertaken by our Geo secure services facilities, we have been focused on implementing COVID-19 nine.
<unk> mitigation strategy.
All of our residential facilities and Geo reentry and Geo youth services issued guidance consistent with the guidance issued by the CDC.
We put in place quarantine and cohort and policies and procedures and provide and educational and preventative guidance to our employees and all individuals and our care.
We have focused our efforts on increased sanitation measures testing and deploying personal protective equipment, including face masks and we have continuously exercised paid leave and paid time off policies to allow our employees to remain home if needed.
We have also implemented additional screening measures for entry into our facilities.
We continuously evaluate these steps and we'll make adjustments as appropriate and necessary based on updated guidance by the CDC and other best practices.
Despite the challenges associated with the pandemic. We have had several recent positive highlights during the second half of 2020, we completed the reactivation of our company owned Park view Center and Alaska under a new 112 bed contract with the Alaska and department of Corrections.
We also activated 11, new day reporting program sites with capacity to serve approximately 2900 participants under a contract with the Tennessee Department of corrections.
And in Idaho, we activated for non residential program locations to support up to 500 participants under a new partnership with the Idaho Department of corrections.
More recently, we're pleased to have been worded a new contract with the Federal Bureau of prisons for a 118 bed residential reentry center in Tampa and.
And the Tampa, Florida area, which we expect to activate during the second half of 2021.
These positive milestones are indicative of the high quality services delivered by our employees daily.
And we're very proud of our frontline employees, who have continued to deliver rehabilitation and reentry programming to those and our care through these difficult times, often and innovative ways, including through virtual technology.
We are particularly proud of our continued efforts of our geo continuum of care programs.
Our continuum of care program integrates enhanced in custody rehabilitation programs, including cognitive behavioral treatment with post release support services, such as transitional housing transportation clothing, food and job placement assistance.
While we were significantly challenged to and most of our 2020, our COC sites achieved several very important milestones.
And our academic programs and more awarded more than 1200 High school equivalency degrees and our vocational courses awarded close to 4000 and vocational training and certification.
Our substance abuse treatment programs awarded more than 7600 program completion.
And we achieved over 34000, and behavioral program completion and more than 31000 individual cognitive and behavioral session.
We also provided post release support services to more than 3006 hundred individuals returning to their communities with over 1300 participants attained and employment.
We believe that the scope of our continuum of care program is unparalleled and represents a significant contribution to criminal Justice reform.
At this time I will turn the call back to George for his closing remarks.
Thank you and.
We are very proud of our employees, who have demonstrated incredible commitment and dedication during this unprecedented global pandemic.
Despite the significant challenges associated with COVID-19, and new policy changes at the federal level. We believe our company remains resilient and and is supported by long term real estate assets and contracts and tailing essential government services, we've provided high quality essential services for.
More than 30 years, and drew both Democratic and Republican administrations.
We recognize that heightened political rhetoric and the mischaracterization of our role as the government service providers created concerns regarding our future access to financing and.
Are aware of the importance of allocating capital to pay down debt and the current environment.
To continue our focus on paying down debt our board recently reduced our quarterly dividend payment and we will continue to evaluate our dividend policy and capital allocation strategy.
We remain committed to balance our continued creation of value to our shareholders with prudent management of our balance sheet and capital structure.
That completes our presentation and we would be glad to address any questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we'll pause momentarily to assemble our roster.
And our first question will come from Joe Gomes with Noble capital. Please go ahead.
Good morning, George and Brian.
Good morning.
First question I wanted to ask.
You guys have.
Had a nice beat on that adjusted basis for the <unk>.
Guidance you provided.
And the third quarter EBIT in such a difficult operating environment and I was just wondering if you could.
Expound a little bit more on how you guys ended up beating the third quarter guidance.
The guidance made and the third quarter pardon me.
Sure So I think.
Two main issues.
And we've consistently during the pandemic performed better and a number of cost categories and the facilities.
And we continue to see that during the fourth quarter.
And going into next year.
We haven't necessarily assume that all of that benefit will continue so we've been conservative with regards to that benefit that we've been able to experience and manage and then we also saw.
Some.
And a modest improvement and some of our occupancy levels at some of our facilities.
Okay. Thank you for that and on the pain.
I was wondering if you might be able to.
Give us an idea of.
From the three.
Facilities that may be close.
This year and non renewed I guess I should say this year and all.
Kind of a level of revenues are we talking about on an annual basis and then those three contribute and how do you think you can make up for that lost business and I know last quarter, you talked about about their Nebraska was doing and RFP you were talking about.
Potential ice contract here in the northeast and I think <unk>.
And why he's looking for some some more.
Space, maybe you could just give us a little color on where else you're looking to.
Offset some of the decline and the DLP business.
Okay.
We will be marketing those facilities should they become available and vacant.
And two other.
Correctional agencies, and federal state and local.
So.
Those facilities are generally well located and relationship to <unk>.
Large populations and I have.
Among the most modern facilities and the country.
So.
We think we have.
Well design.
Assets that are well located and can be.
Recommissioned and for other clients and the future and.
We will devote our energies to.
Achieve those objectives.
Okay.
And can you can you quantify what the non renewals for Ron on an annual basis in terms of revenues.
Yes, and each of those facilities is about.
And is coincidentally about 800 beds and they are all 30% to $35 million and revenue.
Okay. Thank you for that.
And you said you sold one facility.
And early this year and.
And the third quarter call you mentioned that you were and the process of identifying potential sales.
Where are you guys in that process are you still thinking that.
$100 million.
And and total sales over and over time and still a good number or do you think.
You might have identified some more facilities and any color detail there would be appreciated.
Yeah, and the number that we're targeting right now is right around $100 million I think we still think that thats, a good number and that's probably.
24 months or so.
12 months to 24 months horizon to get that accomplished.
Okay.
And I know you know.
Lot of the especially on the east side and the facilities.
And have minimum contract guarantees and.
And we all know that the ice populations have declined dramatically here and the Covid world.
Is there any way to kind of quantify at all.
How much those populations, maybe not on a percentage basis need to rise.
Before you would be above the minimum guarantee level.
We're significantly below the minimum guarantee level presently because of Covid and.
And the closure of the southern border.
But.
The formula for.
What we can expect and the future is an interplay between new administration and governmental policies.
The eventual opening of the southern border and the eventual passing of the Covid pandemic and the interplay between those three things will.
The result, and the new normalized norm, which.
And may not occur until by the end of the year. So I think of ourselves right now and is in a transition period.
As those three things play out over the course of the year.
Okay, and just one more for me and I'll get back in and <unk>.
Q, George and I Wonder if.
You might kind of give us a little bit of a.
Some more detail kind of the state of the Union.
I was reading the article and the Washington Post where they were mentioning how.
A recent study identified that at least at the U S Marshals service.
Private providers.
And we're doing a much better job in terms of Covid and testing and tracking and and all of the other types of measure than the facilities being run by the public.
<unk>.
Which would be.
Some minor way say hey.
The private guys actually are doing a good job.
Bob.
And so I was just wondering if you kind of give us a little bit more of a state of the union address where you see.
Some of it and it's all going here I know, it's early days and it's difficult with the new administration, but any.
Any more insight or clarity state.
Budgets and how that might be impacting you see that impacting.
The business is you touched a little bit about ice and the Marshalls and the B O P, but any other additional insight or color would be appreciated.
Okay.
Well you brought up many different subjects, let me try to think through <unk>.
Sequentially.
The address them first of all the proposed Covid relief, Phil we think wood.
Bring.
And considerable additional financial resources to the states.
And the.
$350 billion Thats been proposed.
Be distributed to the states would be of a very large financial boost for all of the states.
And particularly the ones and the Sunbelt states.
The Washington Post article, which.
And it did have a chance for review is.
We think fairly representative debt.
The private sector has done a good job.
In dealing with the Covid situation and why would that be we think it is because the private sector is has the flexibility to respond more quickly to issues.
Operational concern like Covid.
And our case.
And Geo we were able to begin testing our employees and our detainees very quickly we got.
We got the 45.
Rapid test machines into our facilities.
We purchased masks and other protective equipment very quickly.
In some of our facilities we've put in.
Our new bipolar ionization system to purify the air in the facilities and remember all of our facilities are air conditioned to begin with and the population levels within our ice facilities in particular are probably less than 40%.
And of their design and occupancy so there is.
And there is plenty of room for us.
Social distancing and we've gone to we think fairly lengthy measures.
Beyond what our normal governmental counterparts have done too.
To mitigate the risks of COVID-19 spread within our facilities, it's interesting that.
And ice.
Of the 65000 people we serve for the year, we only had one fatality, which.
Unfortunate as any fatality would be we still think it's a it's a pretty good.
Reflection on.
The quality of services, we provide in our ice facilities and the mitigation that took place by not only the.
Ice and CDC directives regarding social distancing, but our own individual initiative efforts, which were not required by contract per se, but we did among our own and bind PPE equipment.
Rapid COVID-19 testing equipment and these.
New systems for.
Bipolar I and.
<unk> of the air systems.
Great. Thanks for that George much appreciated.
Thank you.
Yeah.
Our next question will come from Mitra.
For Aimco, Paul with Sidoti. Please go ahead.
Yes, hi, good morning, guys. Thanks for taking the questions just wanted to start with the impact of Covid for us and again I noted a lot of moving parts share, but if you can maybe give us a big picture sense in terms of the impact it had on the business and 2020 and I know you indicated you expect.
Get to normalize by year end 'twenty, one but.
And how cautious are you in terms of the recovery as it relates to the guidance.
Yeah.
It's my impression that the Covid impact has been 15% to 20% reduction and our financial profitability.
It could have been much worse, if it were and for some of these guarantees and let me speak to the reason for the guarantees.
And when we operate a facility.
Required by contract to have a certain number of employees and staff regardless of the actual occupancy on a day to day basis, and that's because it takes so long through the clearance process to bring any new employee onboard.
It's a matter of several weeks if not months. So you can't just scale up and scale down very quickly and any of our federal facilities they need to be rather.
Orderly.
Normalized as far as the staffing levels and that requires the payment of the labor costs, which are the <unk>.
70% of the overall costs at any facility and of course, you have the cost for the building.
For us all of the building and are just part of the building the cost for the building the team.
So thats why guarantees are in place.
Okay No that's good.
And as it relates to vaccinations, and hopefully using that to get occupancy levels back up.
If you can give us an update and tells US where you stand until zone.
And your facilities.
Receiving it and being able to do it and our.
Federal facilities, we're kind of waiting in line.
As to when there'll be a broader distribution of vaccines, but I know and some of our state facilities that.
They are able to move more quickly on that I'll ask.
Yes, we have we've contacted every local state and County Health Board and and health departments to get into the queue for vaccinations at every one of our facilities nationwide.
A number of states are distributing at a higher rate look for example, new Mexico, Indiana, and so we are getting our folks vaccinated and those states, but I can tell you and every one of our location we have built relationships with the local health department were in the queue for distributions.
And and we will be prioritized and that distribution as as vaccines become available. So again, we're just very very anxious to be able to try to get everyone vaccinated.
Patiently waiting like most of the country is right now as we.
As our names come up.
Okay. Thanks.
And as it relates to ice I've been reading recently, it has been and sort of an uptick and.
Border crossings and I'm not quite sure how the administration's dealing with it but initially it looks like they are.
And keeping a notebook individuals' here as opposed to release and that immediately as we saw in the past administration and I was just wondering any thoughts on data if you potentially see that.
Maybe a tailwind going forward with the new administration.
While we know ice is doing a lot of planning, but I think the situation and it's fair to say is fluid.
And between the ice storm and.
And Covid.
And a lot of things that has to be factored into their planning and.
And I think they are mindful that there is.
Tens of thousands of people.
Awaiting in Mexico at our southern border and <unk>.
And they'd like to bring some of them in an orderly fashion.
But.
And that needs to be planned out and I think thats what they are.
Focusing on at this time.
Okay. Thanks.
And then just switching to community based services the occupancy certainly.
Declined pretty meaningfully this past year due to the environment.
And I was just wondering if you see it as basically as a bottom somewhere.
Like you have quite a few.
<unk> going forward in terms of activating some new facilities and it seems like you might have a good pipeline there in terms of bringing on new business.
So this is and the new business that I spoke of was our reentry residential centers. So yes, we do see that beginning to build back slowly with Covid and.
Direct to your question about the youth facilities Covid had quite an impact on the census reduction and in most cases across the country the core.
Stop intakes referrals were stop so we were really at a standstill and then just to ensure social distancing to make sure all the CDC guidelines and protocols are in place.
The census came down significantly we are beginning to see a bit of a build as we see the positive cases declined quite dramatically and the new site.
The division.
Okay. Thanks, again for taking the questions.
The next question will come from Kurt Ludtke with Imperial capital. Please go ahead.
Good morning.
Good morning anymore.
Uh huh.
A couple of topics.
One your your fiscal 'twenty, one guidance and then.
Other your dividend policy.
Yes, I can only imagine how difficult.
Forecasting must be for you, but I'm curious you mentioned there are for facilities ramping.
During the course of 'twenty, one and contributing to the the 'twenty one guidance could you. If we're thinking about this in terms of a bridge.
Could you quantify how much incremental.
EBITDA those for facilities are contributing.
Okay.
No I mean, we don't historically give EBITDA guidance by facility I think.
We've indicated the.
Revenue.
And.
Impact from the facilities that are expected to go away I don't have the exact revenue impacted and facilities that are coming online, but we typically provide that guidance as well.
As I said the <unk> facilities.
And that are expected to.
Roll off this year, there's about $100 million and revenue between the three of them, but all of that revenue impact. This year. Some of the revenue that will impact us and facilities that have already been announced for termination plus these others that we expect to terminate.
<unk> offset by the facilities that are coming online which are mainly the.
Facilities in California, and the U S marshals facility in Texas.
Okay. That's helpful. Thank you and.
With respect to.
Pricing.
Another I'm sure.
Difficult thing to model right now but.
You mentioned there are a number of facilities, where the occupancy rates are low how did you think about <unk>.
Pricing and contract minimums on the on the new contracts.
Our renewed this year.
Okay.
While most of our contracts that when they renew so we're talking about contracts that are within the full contract term when they renew those those pricing mechanisms are already set on our federal contract step ups and price are built into the contract and.
And on our state contracts, we may go through and appropriations process to get an incremental increase for and adjustment inflation, but the other terms and the contracts do.
Do not change those are those are already established when we enter into the initial base period and the contract.
Oh interesting okay. Thank you and.
And then with respect to your dividend policy.
We will you continue to flex.
The dividends with profitability or is there a dollar payout that you want to.
Do you want to maintain is there a floor on the dividend.
Well, we have to maintain a certain amount of dividend to maintain our REIT status.
And.
As far as increasing and dividend, we will evaluate whether we're going to increase or decrease or change the dividend or hold it steady on a quarterly basis I think based on.
The guidance that we've already established and looking at our capital requirements. The.
The cash flows and.
And and trying to also maintain debt reduction of $75 million to $100 million per year.
Okay, and then lastly.
Have there been any developments.
And that the board.
Did not anticipate the last time you considered your REIT status.
When you say when we considered the REIT status when we converted to a REIT.
Well as you know.
I think last call you talked about that the board has has evaluated the REIT status and decided to remain a REIT has anything happened since that last.
At last decision point.
That was a surprise that might might prompt a reconsideration of the or is everything that's happened and the last couple of months was that already and largely anticipated.
Well I think the dividend policy like we said will be reevaluated as George said.
A little bit of a transitional period I think there were three items he mentioned.
<unk>.
Policy and the new administration and how the pandemic wave.
Wayne's or adjusted during the year and then the impact of Occupancies on our facilities due to border policy.
I would acknowledge that the new executive orders had an impact that's the newest thing that's occurred and we have factored that into R. R.
Budget for this upcoming year.
Okay, Great I appreciate it thank you.
Okay.
The next question will come from Jordan Sherman with Ranger Global. Please go ahead.
Thanks, just wanted to clarify one point on the <unk>.
Situation, and then where it's actually two points and then.
And then bigger picture question.
The three facilities that you expect to roll off this year you have not received notice yet of those.
When would you expect to see to get specific notice about those.
No.
Or have you received specific nodes.
For like when is it required typically we would receive notice about 60 days prior to that option period, if they were going to provide us notice.
Okay and.
And then beyond the three that have been.
And you canceled the three that would roll off how many additional facilities are there and what is it won't be the timing of that contract expiry.
Well there is there is.
Three other contracts one is.
And owned facility similar in size for the other ones. We've discussed <unk> thousand 800 beds about $35 million and revenue debt.
And that contract.
The next renewal point would be September of 2022 net.
Uh Huh Northlake Northlake, and then Theres two other facilities that are.
For a unique managed only facilities, where we provide senior level.
Management services, we don't own the real estate and.
And combined between the two there are only about 5% to $7 million and revenue per year both of those.
And I have renewal dates that are also in 2022.
Would you expect those to be part of this process as well.
They could be.
Not clear yet.
It's not clear.
Okay.
From a policy standpoint, as you think about.
And Theres a lot of commentary about.
You know the.
Push from the progressive side and clearly you had this.
The memo accounts.
And the.
You know the Doj not renewing and seeking to renew.
Private prisons contracts.
But I guess as you think about the implementation of that and maybe any any roll through for the rest of the administration policies.
How much comfort or not do you get from.
And the people who are directly sort of overseeing the sort of key areas like Ala.
100, and orcas at DHS and I guess.
And more Garland.
Over the Doj.
And of course, you know you've got buy and all of them seem to be moderate.
With.
And so practical experience.
So I'm wondering how you think about how you know.
And so the bigger picture and I guess.
Susan Rice at the head of domestic policy as well.
And that's the policy council or practical with with practical experience moderates.
And so I'm just wondering how you think you know from a policy standpoint.
About that.
I do agree that we consider all three moderates.
But we acknowledge that there there is a different philosophy.
That will be.
Affected by the three things I was talking about and that is.
The.
The technical issues of changing immigration and historical immigration policies.
Technical issues that are involved with that.
And legal issues and the Covid situation and whether it continues or base and the eventual opening of the border. So even if you want to have a fundamental change you still have to face those headwinds.
And how to implement your new policies.
And.
Right.
Okay, and then I guess, just doesn't feel on that and a lot of moving parts.
When you think about the whole.
And I used to attention levels.
You know our borders closed now although as mentioned earlier, the southwest and counters are up dramatically.
CT systems have slowed or shut down.
We are moving to them.
And our system with more cash from a lease and non and not trying to detain.
And as many people.
And we'll lease that's the goal yet and we havent seen how that will work out.
And changes, possibly and interior enforcement.
Alternatives to two two.
Detention.
If you think about the timeline for for these changes.
I've been focused and I guess I focused and on the sort of the the budgets for ice as one data point.
And what else would you be looking for specifically I guess since the opening and potential opening up and the border.
I guess what are the timeline and some of these things and you could think about them for for when do you think you will see.
And.
Additional information.
I originally thought things would happen more quickly, but now the view that I think it's going to take the full year for things to.
And.
Fall into place and to normalize.
So I think the time horizon for normalization is probably towards the end of the year.
But no specific deadline.
Other than the budget discussion, which has its own tells only part and the zone and there's no specific.
David deadline data points that you can point to that you know no not that I'm aware of.
And then when you have.
Freak snowstorm.
Hit the the United States and loss of power.
And involving millions of people.
Throws a wrench into any kind of.
Operational.
Reformatting.
And prior policies.
Understood.
Okay and then just can you talk about the.
You have some some debt coming due over the next few years, including I guess, a couple of hundred million.
Next year $300 million in 'twenty, three and then of course for the bigger.
And the things coming due in 'twenty for can you talk about how your plans and your thoughts about how to address those.
Yes.
Well.
And obviously, firstly will address the 2020 twos.
We.
We will look at the capital markets and try to get something done there. We also have.
Our revolving credit facility has approximately.
$250 million and capacity that we can.
Slide towards.
Paydown of unsecured debt.
So that's a backstop and then as we mentioned also we want to pay down about $75 million to $100 million too.
Free cash flow or use of our cash flow so I.
I think those are that the.
Three things that will be working together to try and take out those the next two instruments for 'twenty twos and the 'twenty threes and then as we see that occur I think we will have improved access to the market to take out the other instruments.
And the timing of addressing the 'twenty twos when do you start that process.
First half of this year.
With the announcement of the details as you can.
Two.
Together, yes, I mean, whatever we do and yes, there'll be some sort of announcement when we do something absolutely.
Okay, Alright, thank you very much.
The next question will come from Nick <unk> with Stifel. Please go ahead.
Hi, Thanks for taking the questions.
On the ice contracts I know some questions and asked already but I can try a different approach and a world, where there's going to be and limited arrest and deportations can you help us think about how your ice facilities fit into and administration that is going to be having such a materially different.
For the rest and deportation policy.
Well.
We've been providing these services for more than three decades, and the locations of the facilities.
And we're generally specified.
Bye.
By ice over the course of the last three decades, so and they are among the newest facilities in the country Theyre all air condition.
They're all.
Accredited by the American Correctional Association from a design standpoint, and we've incorporated.
And favorable amenities and the facilities like flat screen, Tvs and artificial turf soccer fields and.
Additional.
Program spaces inside the facilities as well as.
Outside the facility and.
And as has been mentioned.
And these facilities have typically double the healthcare staff that you would find at any correctional facility. So the the healthcare.
The departments are fairly elaborate and and.
And have a capacity that.
That is unmatched and generally buy.
And correctional facilities of comparable size as they should be because these are not correctional facilities. There are civil detention facilities, and we agree that they need to look and be operated differently.
And with different rules that come from mice and we.
We think we've.
Achieved the objectives of advice over the years in and.
And.
And re styling, how these for facilities look and how they operate and the amenities available for the residents.
And we are flexible to further changes as is.
There is new thinking on what these facilities should look like or how they should operate we remain flexible we are just a government services provider that.
Provides.
And the services that are specified in the solicitation, we do what we're asked to do.
And we so we go beyond that.
So then it returns for the question of I agree that.
The facilities.
Awful lot of boxes in terms of improving anyone who comes over the border there.
Immediate quality of what's better than being outside and the elements. However.
And from the government services perspective, if the government is no longer arresting and deporting. Our your service is still needed.
Well I don't think.
Completely stop arresting and deporting.
There could be a change in and the volume that you speak of but.
And that will have to be re price is.
If it comes to pass or if it's necessary, but if you have a building that can hold.
A certain amount of people and it holds slightly less that that will require slightly less staff and slightly less cost. So we have the flexibility to re price according to the government's needs.
But the day.
Yeah.
I have been.
Thoughtful and.
And prior years that.
There are fluctuations in the population that better seasonal and.
And.
The summer months are the most active months the winter and force fourth quarter.
Or are the lowest active months and so.
And go through these fluctuations and.
It's difficult to.
Adjusted those fluctuations on a staffing basis, because it takes so long to.
Recruit and retain staff better background screening so.
<unk> has generally stayed fairly soon.
Staple, but if theres a step down in the staffing.
And for long term objectives, and lower capacity under the Trump administration, the capacity or the number of residents and ice facilities rose to 50000.
As compared to at the end of the.
Obama administration is 35000.
Today, it's 16000 and primarily because of Covid.
So where it goes.
From where it is today.
And I'm not sure anybody knows because of so many factors that come into play.
But we we.
We have been good partners with ice for three decades, and we hope that relationship will continue and the future.
So given the fact that nobody really knows what's happening with ice and wanted to address the REIT versus C Corp, and the distributions.
Leverage from my perspective is high and given that there's lack of clarity and the overall outlook for the business. How do you justify still paying out over $100 million of distributions to shareholders rather than focusing on the balance sheet.
Well.
We would think that.
Some of the shareholders have bought into the Companys stock because of the.
The dividend.
But we've been trying to balance the interest of both.
The bondholders and the shareholders and.
We've reduced the dividend by almost 50% and the last year. So we think we are looking out for both interest as we move forward and.
And paying down debt, while reducing our dividend.
And as Brian said, we look at this on a quarter by quarter basis.
Alright, so all I have.
Our time for the question and answer session has concluded at this time.
I would like to turn the conference back over to George solely and for any closing remarks. Please go ahead Sir.
We thank you for your participation in today's call and your questions and look forward to addressing you in the future. Thank you.
The conference call has now concluded. Thank you for attending today's presentation you may now disconnect.
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