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8-K - FORM 8-K - GEO GROUP INC | g25955e8vk.htm |
Exhibit 99.1
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Combined Financial Information
takes into consideration adjustments that are directly
attributable to the Cornell Acquisition and the BI Acquisition,
including certain financing activities, and are expected
to have a continuing impact and are factually supportable. All
pro forma adjustments have been explained in the related notes
set forth below. The following Unaudited Pro Forma Condensed
Combined Financial Information is based on the historical
financial statements of GEO and Cornell, and the historical
financial statements and accounting records of BII Holding after
giving effect to the assumptions, reclassifications and
adjustments described in the accompanying notes to the Unaudited
Pro Forma Condensed Combined Financial Information. The pro
forma adjustments included in the Unaudited Pro Forma Condensed
Combined Balance Sheet as of October 3, 2010 present the
pro forma effect of the acquisition of BII Holding as if it had
occurred on that date. The Unaudited Pro Forma Condensed
Combined Statements of Income (loss) for the thirty-nine weeks
ended October 3, 2010, the thirty-nine weeks ended
September 27, 2009 and for the year ended January 3,
2010 give effect to the acquisitions of Cornell and BII Holding
as if they had occurred on December 29, 2008.
The Unaudited Pro Forma Condensed Combined Financial Information
should be read in conjunction with (i) GEOs
historical consolidated financial statements;
(ii) Cornells historical consolidated financial
statements; and (iii) BII Holdings historical
consolidated financial statements.
GEO will account for the BI Acquisition as a business
combination in accordance with GAAP. Upon completion of the
acquisition, GEO will own 100% of the equity interests in BII
Holding. In order to determine the acquirer for accounting
purposes, GEO considered relative voting rights, the composition
of the governing body of the combined entity and the composition
of senior management of the combined entity after the
acquisition. Based on the weighting of these factors, GEO has
concluded that it is the accounting acquirer. Under the business
combination method of accounting, as of the effective time of
the acquisition, the assets acquired, including the identifiable
intangible assets, and liabilities assumed from BII Holding will
be recorded at their respective fair values and added to those
of GEO. Any excess of the purchase price for the acquisition
over the net fair value of BII Holdings identified assets
acquired and liabilities assumed will be recorded as goodwill
and any transaction costs and restructuring expenses associated
with the acquisition will be expensed as incurred. The results
of operations of BII Holding will be combined with the results
of operations of GEO beginning at the effective time of the
acquisition.
The unaudited pro forma financial data is based on the historical financial statements of
GEO, Cornell, BII Holding, and on publicly available information
and certain assumptions that GEO believes are reasonable, which
are described in the notes to the Unaudited Pro Forma Condensed
Combined Financial Information. GEO has not yet performed a detailed valuation
analysis necessary to determine the fair market values of BII
Holdings assets to be acquired and liabilities to be
assumed. The preliminary purchase price allocation for Cornell,
which has been disclosed in GEOs Quarterly Report on
Form 10-Q
as of and for the thirty-nine weeks ended October 3, 2010,
is presented in Note 3 to the Unaudited Pro Forma Condensed
Combined Financial Information. This preliminary allocation of
the purchase price to identifiable net assets acquired and of
the excess purchase price to goodwill represents GEOs most
current estimate of the allocation.
The Unaudited Pro Forma Condensed Combined Financial Information
is provided for informational purposes only. The pro forma
information provided is not necessarily indicative of what the
combined companys financial position and results of
operations would have actually been had the acquisitions and
certain financing activities been completed on the dates used to
prepare the pro forma financial information. The adjustments to
fair value and the other estimates reflected in the accompanying
Unaudited Pro Forma Condensed Combined Financial Information may
be materially different from those reflected in the combined
companys consolidated financial statements subsequent
1
to the acquisitions and certain financing activities. In addition,
the Unaudited Pro Forma Condensed Combined Financial Information
does not purport to project the future financial position or
results of operations of GEO, after giving effect to the Cornell
Acquisition, the BI Acquisition and certain financing activities.
Reclassifications and adjustments may be required if changes to
GEOs consolidated financial presentation are needed to
conform Cornells and BII Holdings accounting
policies to those of GEO.
The Unaudited Pro Forma Condensed Combined Financial Information
has been prepared in a manner consistent with the accounting
policies adopted by GEO. The accounting policies followed for
financial reporting on a pro forma basis are the same as those
disclosed in the notes to Consolidated Financial Information
included in GEOs Annual Report on
Form 10-K
filed with the Securities and Exchange Commission on
February 22, 2010 for the fiscal year ended January 3,
2010. The Unaudited Pro Forma Condensed Combined Financial
Information does not assume any differences in accounting
policies between GEO, Cornell and BII Holding. Upon consummation
of the BI Acquisition, GEO will review the accounting policies
of BII Holding to ensure conformity of such accounting policies
to those of GEO and, as a result of that review, GEO may
identify differences between the accounting policies of the two
companies, that when conformed, could have a material impact on
GEOs combined financial information. At this time, GEO is
not aware of any differences in accounting policies that would
have a material impact on the Unaudited Pro Forma Condensed
Combined Financial Information.
The Unaudited Pro Forma Condensed Combined Financial Information
does not give effect to any anticipated synergies, operating
efficiencies or costs savings that may be associated with these
transactions. This information also does not include any
integration costs the companies may incur related to the
acquisitions as part of combining the operations of the
companies. The Unaudited Pro Forma Condensed Combined Financial
Information includes an estimate for aggregate transaction
costs. Additional costs, not included in the Unaudited Pro Forma
Condensed Combined Financial Information, will likely be
incurred for items such as systems integration and conversion,
change in control and other employee benefits, lease termination
and/or modification costs, and training costs. A substantial
portion of these costs will be incurred over the year following
the acquisitions. In general, these costs will be recorded as
expenses when incurred and are non-recurring, and, therefore,
are not reflected in the Unaudited Pro Forma Condensed Combined
Financial Information.
2
THE GEO
GROUP INC.
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
Historical | ||||||||||||||||||||||||
GEO |
||||||||||||||||||||||||
As of |
BII Holding As |
|||||||||||||||||||||||
October 3, |
of September 30, |
Pro Forma |
Pro Forma |
|||||||||||||||||||||
2010 | 2010 | Reclassifications(A) | Adjustments | Note | Combined | |||||||||||||||||||
(in 000s) | ||||||||||||||||||||||||
Current Assets
|
||||||||||||||||||||||||
Cash and cash equivalents
|
$ | 53,766 | $ | 5,134 | | | (B | ) | $ | 58,900 | ||||||||||||||
Restricted cash and investments
|
40,180 | 100 | | | 40,280 | |||||||||||||||||||
Accounts receivable, less allowance for doubtful accounts
|
261,683 | 15,653 | | | 277,336 | |||||||||||||||||||
Income tax receivable
|
| 105 | (105 | ) | | | ||||||||||||||||||
Inventories
|
| 5,038 | (5,038 | ) | | | ||||||||||||||||||
Current portion of sales-type leases receivable
|
| 1,879 | (1,879 | ) | | | ||||||||||||||||||
Deferred income tax asset, net
|
31,195 | 5,231 | | 8,158 | (C | ) | 44,584 | |||||||||||||||||
Other current assets, net
|
21,443 | 4,294 | 7,022 | | 32,759 | |||||||||||||||||||
Total current assets
|
408,267 | 37,434 | | 8,158 | 453,859 | |||||||||||||||||||
Restricted Cash Investments
|
39,766 | | | | 39,766 | |||||||||||||||||||
Sales-type leases receivable, net of current
portion
|
| 4,189 | (4,189 | ) | | | ||||||||||||||||||
Rental and monitoring equipment, net
|
| 14,265 | (14,265 | ) | | | ||||||||||||||||||
Property and Equipment, Net
|
1,498,886 | 6,283 | 23,288 | | 1,528,457 | |||||||||||||||||||
Assets Held for Sale
|
4,348 | | | | 4,348 | |||||||||||||||||||
Lease Receivables, net of current portion
|
36,835 | | 4,189 | | 41,024 | |||||||||||||||||||
Goodwill
|
244,568 | 169,941 | | 121,870 | (D | ) | 536,379 | |||||||||||||||||
Intangible Assets, net
|
92,342 | 107,257 | | 143 | (E | ) | 199,742 | |||||||||||||||||
Capitalized Software, net
|
| 9,023 | (9,023 | ) | | | ||||||||||||||||||
Deferred Financing Fees
|
| 4,144 | | (4,144 | ) | (F | ) | | ||||||||||||||||
Other Non-Current Assets
|
64,948 | 289 | | 9,800 | (F | ) | 75,037 | |||||||||||||||||
$ | 2,389,960 | $ | 352,825 | | $ | 135,827 | $ | 2,878,612 | ||||||||||||||||
LIABILITIES AND SHAREHOLDERS EQUITY
|
||||||||||||||||||||||||
Current Liabilities
|
||||||||||||||||||||||||
Accounts payable
|
$ | 66,799 | 4,099 | | | 70,898 | ||||||||||||||||||
Accrued payroll and related taxes
|
43,690 | 3,844 | | | 47,534 | |||||||||||||||||||
Deferred revenue
|
| 1,162 | (1,162 | ) | | | ||||||||||||||||||
Accrued expenses and other current liabilities
|
119,323 | 766 | 1,162 | | 121,251 | |||||||||||||||||||
Current portion of
long-term
debt, capital lease obligations and
non-recourse
debt
|
41,173 | 772 | | 1,728 | (G | ) | 43,673 | |||||||||||||||||
Total current liabilities
|
270,985 | 10,643 | | 1,728 | 283,356 | |||||||||||||||||||
Deferred Income Tax Liabilities
|
51,069 | 38,163 | | (454 | ) | (H | ) | 88,778 | ||||||||||||||||
Other Non-Current Liabilities
|
50,996 | 10,727 | | 61,723 | ||||||||||||||||||||
Deferred Revenue and Other Liabilities
|
| 3,177 | (3,177 | ) | | | ||||||||||||||||||
Accrued Contingent Consideration
|
| 7,550 | (7,550 | ) | | | ||||||||||||||||||
Capital Lease Obligations
|
13,888 | | 449 | | 14,337 | |||||||||||||||||||
Long-Term Debt
|
802,506 | 181,908 | (449 | ) | 253,967 | (I | ) | 1,237,932 | ||||||||||||||||
Non-Recourse Debt
|
191,603 | | | | 191,603 | |||||||||||||||||||
Shareholders Equity
|
||||||||||||||||||||||||
Preferred stock, $0.01 par value, 30,000 shares
authorized, none issued or outstanding
|
| | | | | |||||||||||||||||||
Common stock, $0.01 par value, 90,000 shares
authorized, 84,256 issued and 64,416 outstanding
|
644 | 12 | | (12 | ) | (J | ) | 644 | ||||||||||||||||
Additional paid-in capital
|
713,296 | 133,132 | | (133,132 | ) | (J | ) | 713,296 | ||||||||||||||||
Retained earnings/Accumulated Deficit
|
405,047 | (21,760 | ) | | 13,730 | (J | ) | 397,017 | ||||||||||||||||
Accumulated other comprehensive income
|
7,762 | | | | 7,762 | |||||||||||||||||||
Treasury stock, at cost
|
(138,848 | ) | | | | (138,848 | ) | |||||||||||||||||
Total shareholders equity attributable to The GEO
Group, Inc.
|
987,901 | 111,384 | | (119,414 | ) | 979,871 | ||||||||||||||||||
Noncontrolling interests
|
21,012 | | | | 21,012 | |||||||||||||||||||
Total Shareholders Equity
|
1,008,913 | 111,384 | | (119,414 | ) | 1,000,883 | ||||||||||||||||||
$ | 2,389,960 | $ | 352,825 | | $ | 135,827 | $ | 2,878,612 | ||||||||||||||||
3
THE GEO
GROUP INC.
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (LOSS)
Thirty-Nine
Weeks Ended October 3, 2010
Historical | Historical | |||||||||||||||||||||||||||||||||||||
Cornell |
BII Holding |
|||||||||||||||||||||||||||||||||||||
GEO |
Six Months |
Cornell |
Nine Months |
|||||||||||||||||||||||||||||||||||
Thirty-Nine |
Ended |
July 1- |
Pro Forma |
Ended |
Pro Forma |
|||||||||||||||||||||||||||||||||
Weeks Ended |
June 30, |
August 11, |
Adjustments |
September 30, |
Reclassifications |
Adjustments |
Pro Forma |
|||||||||||||||||||||||||||||||
October 3, 2010 | 2010 | 2010(a) | of Cornell | Note | 2010 | of BII Holding(KK) | of BII Holding | Note | Combined | |||||||||||||||||||||||||||||
(in thousands except per share data) | ||||||||||||||||||||||||||||||||||||||
Revenues
|
$ | 895,570 | $ | 203,877 | $ | 44,854 | $ | (1,078 | ) | (L) | $ | 82,557 | $ | | $ | | $ | 1,225,780 | ||||||||||||||||||||
Operating Expenses
|
694,348 | 151,476 | 35,774 | (6,072 | ) | (L,M) | 49,185 | (2,690 | ) | | 922,021 | |||||||||||||||||||||||||||
Pre-opening and
start-up
expenses
|
| | | | | | | | ||||||||||||||||||||||||||||||
Provision for Doubtful Accounts
|
| | | | 468 | (468 | ) | | | |||||||||||||||||||||||||||||
Depreciation and Amortization
|
32,096 | 9,254 | 2,105 | 3,678 | (N) | | 17,729 | (3,606 | ) | (NN | ) | 61,256 | ||||||||||||||||||||||||||
Research and Development Expenses
|
| | | | 2,052 | (2,052 | ) | | | |||||||||||||||||||||||||||||
General and Administrative Expenses
|
72,028 | 13,760 | 23,661 | (36,669 | ) | (O) | | 10,931 | | 83,711 | ||||||||||||||||||||||||||||
Selling, General and Administrative Expenses
|
| | | | 24,388 | (23,450 | ) | (938 | ) | (T | ) | | ||||||||||||||||||||||||||
Operating Income (Loss)
|
97,098 | 29,387 | (16,686 | ) | 37,985 | 6,464 | | 4,544 | 158,792 | |||||||||||||||||||||||||||||
Interest Income
|
4,448 | 255 | 67 | | | 2 | | 4,772 | ||||||||||||||||||||||||||||||
Interest Expense
|
(28,178 | ) | (12,601 | ) | (2,859 | ) | 3,693 | (P) | (15,020 | ) | (2 | ) | (3,490 | ) | (PP | ) | (58,457 | ) | ||||||||||||||||||||
Other Expense, net
|
| | | | (10 | ) | | | (10 | ) | ||||||||||||||||||||||||||||
Loss on Extinguishment of Debt
|
(7,933 | ) | | | | | | | (7,933 | ) | ||||||||||||||||||||||||||||
Income (Loss) Before Income Taxes, Equity in Earnings of
Affiliates
|
65,435 | 17,041 | (19,478 | ) | 41,678 | (8,566 | ) | | 1,054 | 97,164 | ||||||||||||||||||||||||||||
Provision for Income Taxes
|
28,560 | 7,477 | (7,030 | ) | 11,980 | (Q) | (2,059 | ) | | 421 | (Q | ) | 39,349 | |||||||||||||||||||||||||
Equity in Earnings of Affiliates, net of income tax
provision
|
2,868 | | | | | | | 2,868 | ||||||||||||||||||||||||||||||
Income (Loss) from Continuing Operations
|
39,743 | 9,564 | (12,448 | ) | 29,698 | (6,507 | ) | | 633 | 60,683 | ||||||||||||||||||||||||||||
Less: Earnings Attributable to Non-controlling Interests
|
227 | (1,155 | ) | (318 | ) | 459 | (R) | | | | (787 | ) | ||||||||||||||||||||||||||
Income (Loss) from Continuing Operations Before Estimated
Nonrecurring Charges Related to the Transaction Attributable to
the Combined Company
|
$ | 39,970 | $ | 8,409 | $ | (12,766 | ) | $ | 30,157 | $ | (6,507 | ) | | $ | 633 | $ | 59,896 | |||||||||||||||||||||
Weighted Average Common Shares Outstanding:
|
||||||||||||||||||||||||||||||||||||||
Basic
|
52,428 | 14,903 | 861 | (S) | 68,192 | (S) | ||||||||||||||||||||||||||||||||
Diluted
|
53,044 | 15,050 | 714 | (S) | 68,808 | (S) | ||||||||||||||||||||||||||||||||
Earnings per Common Share
|
||||||||||||||||||||||||||||||||||||||
Basic:
|
||||||||||||||||||||||||||||||||||||||
Income from Continuing Operations Before Estimated Nonrecurring
Charges Related to the Transaction Attributable to the Combined
Company
|
$ | 0.76 | $ | 0.56 | ||||||||||||||||||||||||||||||||||
Diluted:
|
||||||||||||||||||||||||||||||||||||||
Income from Continuing Operations Before Estimated Nonrecurring
Charges Related to the Transaction Attributable to the Combined
Company
|
$ | 0.75 | $ | 0.56 |
(a) In order to present Cornells financial results
for the full thirty-nine weeks ended October 3, 2010, the stub
period July 1, 2010 through August 11, 2010 has been included.
4
THE GEO
GROUP INC.
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (LOSS)
Thirty-Nine
Weeks Ended September 27, 2009
Historical | Historical | |||||||||||||||||||||||||||||||||||
GEO |
Cornell |
BII Holding |
||||||||||||||||||||||||||||||||||
Thirty-Nine |
Nine Months |
Nine Months |
||||||||||||||||||||||||||||||||||
Weeks Ended |
Ended |
Pro Forma |
Ended |
Pro Forma |
||||||||||||||||||||||||||||||||
September 27, |
September 30, |
Adjustments |
September 30, |
Reclassifications of |
Adjustments |
Pro Forma |
||||||||||||||||||||||||||||||
2009 | 2009 | of Cornell | Note | 2009 | BII Holding(KK) | of BII Holding | Note | Combined | ||||||||||||||||||||||||||||
(in thousands except per share data) | ||||||||||||||||||||||||||||||||||||
Revenues
|
$ | 830,305 | $ | 308,323 | $ | (1,281 | ) | (L) | $ | 77,385 | $ | | $ | | $ | 1,214,732 | ||||||||||||||||||||
Operating Expenses
|
655,413 | 222,044 | (3,214 | ) | (M,N) | 43,738 | (3,475 | ) | | 914,506 | ||||||||||||||||||||||||||
Provision for Doubtful Accounts
|
| | | 620 | (620 | ) | | | ||||||||||||||||||||||||||||
Depreciation and Amortization
|
29,062 | 14,093 | 4,624 | (N) | | 22,374 | (5,240 | ) | (NN) | 64,913 | ||||||||||||||||||||||||||
Research and Development Expenses
|
| | | 2,052 | (2,052 | ) | | | ||||||||||||||||||||||||||||
General and Administrative Expenses
|
49,936 | 18,214 | | | 11,522 | | 79,672 | |||||||||||||||||||||||||||||
Selling, General and Administrative Expenses
|
| | | 28,687 | (27,749 | ) | (938 | ) | (T) | | ||||||||||||||||||||||||||
Operating Income (Loss)
|
95,894 | 53,972 | (2,691 | ) | 2,288 | | 6,178 | 155,641 | ||||||||||||||||||||||||||||
Interest Income
|
3,520 | 530 | | | 10 | | 4,060 | |||||||||||||||||||||||||||||
Interest Expense
|
(20,498 | ) | (19,435 | ) | 4,641 | (P) | (14,643 | ) | (10 | ) | (5,339 | ) | (PP) | (55,284 | ) | |||||||||||||||||||||
Other Expense, net
|
| | | (18 | ) | | | (18 | ) | |||||||||||||||||||||||||||
Income (Loss) Before Income Taxes, Equity in Earnings of
Affiliates, and Discontinued Operations
|
78,916 | 35,067 | 1,950 | (12,373 | ) | | 839 | 104,399 | ||||||||||||||||||||||||||||
Provision for Income Taxes
|
30,374 | 14,499 | 780 | (Q) | (4,640 | ) | | 335 | (Q) | 41,348 | ||||||||||||||||||||||||||
Equity in Earnings of Affiliates, net of income tax
provision
|
2,407 | | | | | | 2,407 | |||||||||||||||||||||||||||||
Income (Loss) from Continuing Operations
|
50,949 | 20,568 | 1,170 | (7,733 | ) | | 504 | 65,458 | ||||||||||||||||||||||||||||
Less: Earnings Attributable to Non-controlling Interests
|
(129 | ) | (1,386 | ) | 521 | (R) | | | | (994 | ) | |||||||||||||||||||||||||
Income (Loss) from Continuing Operations Before Estimated
Nonrecurring Charges Related to the Transaction Attributable to
the Combined Company
|
$ | 50,820 | $ | 19,182 | $ | 1,691 | $ | (7,733 | ) | | $ | 504 | $ | 64,464 | ||||||||||||||||||||||
Weighted Average Common Shares Outstanding:
|
||||||||||||||||||||||||||||||||||||
Basic
|
50,800 | 14,880 | 884 | (S) | 66,564 | (S | ) | |||||||||||||||||||||||||||||
Diluted
|
51,847 | 14,968 | 796 | (S) | 67,611 | (S | ) | |||||||||||||||||||||||||||||
Earnings per Common Share
|
||||||||||||||||||||||||||||||||||||
Basic:
|
||||||||||||||||||||||||||||||||||||
Income from Continuing Operations Before Estimated Nonrecurring
Charges Related to the Transaction Attributable to the Combined
Company
|
$ | 1.00 | $ | 1.29 | ||||||||||||||||||||||||||||||||
Diluted:
|
||||||||||||||||||||||||||||||||||||
Income from Continuing Operations Before Estimated Nonrecurring
Charges Related to the Transaction Attributable to the Combined
Company
|
$ | 0.98 | $ | 1.28 |
5
THE GEO
GROUP INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (LOSS)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (LOSS)
Fiscal Year Ended January 3, 2010
Historical | ||||||||||||||||||||||||||||||||||||||
Historical |
BII Holding |
|||||||||||||||||||||||||||||||||||||
GEO |
Cornell |
Twelve Months |
||||||||||||||||||||||||||||||||||||
Fiscal |
Year Ended |
Pro Forma |
Ended |
Pro Forma |
||||||||||||||||||||||||||||||||||
Year Ended |
December 31, |
Reclassifications |
Adjustments |
December 31, |
Reclassifications |
Adjustments |
Pro Forma |
|||||||||||||||||||||||||||||||
January 3, 2010 | 2009 | of Cornell(K) | of Cornell | Note | 2009 | of BII Holding(KK) | of BII Holding | Note | Combined | |||||||||||||||||||||||||||||
(in thousands except per share data) | ||||||||||||||||||||||||||||||||||||||
Revenues
|
$ | 1,141,090 | $ | 412,377 | $ | | $ | (1,708 | ) | (L) | $ | 104,143 | $ | | $ | | $ | 1,655,902 | ||||||||||||||||||||
Operating Expenses
|
897,099 | 295,645 | 4,086 | (4,285 | ) | (L,M) | 58,818 | (3,321 | ) | | 1,248,042 | |||||||||||||||||||||||||||
Pre-opening and
start-up
expenses
|
| 4,086 | (4,086 | ) | | | | | | |||||||||||||||||||||||||||||
Provision for Doubtful Accounts
|
| | | | 820 | (820 | ) | | | |||||||||||||||||||||||||||||
Depreciation and Amortization
|
39,306 | 18,833 | | 6,122 | (N) | | 28,770 | (6,484 | ) | (NN) | 86,547 | |||||||||||||||||||||||||||
Research and Development Expenses
|
| | | | 2,490 | (2,490 | ) | | | |||||||||||||||||||||||||||||
General and Administrative Expenses
|
69,240 | 24,112 | | | | 15,415 | | 108,767 | ||||||||||||||||||||||||||||||
Selling, General and Administrative Expenses
|
| | | | 38,804 | (37,554 | ) | (1,250 | ) | (T) | | |||||||||||||||||||||||||||
Operating Income (Loss)
|
135,445 | 69,701 | | (3,545 | ) | 3,211 | | 7,734 | 212,546 | |||||||||||||||||||||||||||||
Interest Income
|
4,943 | 657 | | | | 11 | | 5,611 | ||||||||||||||||||||||||||||||
Interest Expense
|
(28,518 | ) | (25,830 | ) | | 5,835 | (P) | (19,617 | ) | (11 | ) | (7,020 | ) | (PP) | (75,161 | ) | ||||||||||||||||||||||
Other Expense, net
|
| | | | (31 | ) | | | (31 | ) | ||||||||||||||||||||||||||||
Loss on Extinguishment of Debt
|
(6,839 | ) | | | | | | | (6,839 | ) | ||||||||||||||||||||||||||||
Income (Loss) Before Income Taxes, Equity in Earnings of
Affiliates, and Discontinued Operations
|
105,031 | 44,528 | | 2,290 | (16,437 | ) | | 714 | 136,126 | |||||||||||||||||||||||||||||
Provision for Income Taxes
|
42,079 | 17,955 | | 916 | (Q) | (6,246 | ) | | 286 | (Q) | 54,990 | |||||||||||||||||||||||||||
Equity in Earnings of Affiliates, net of income tax
provision
|
3,517 | | | | | | | 3,517 | ||||||||||||||||||||||||||||||
Income (Loss) from Continuing Operations
|
66,469 | 26,573 | | 1,374 | (10,191 | ) | | 428 | 84,653 | |||||||||||||||||||||||||||||
Less: Earnings Attributable to Non-controlling Interests
|
(169 | ) | (1,947 | ) | | 706 | (R) | | | | | (1,410 | ) | |||||||||||||||||||||||||
Income from Continuing Operations Before Estimated
Nonrecurring Charges Related to the Transaction Attributable to
the Combined Company
|
$ | 66,300 | $ | 24,626 | $ | 2,080 | $ | (10,191 | ) | $ | 428 | $ | 83,243 | |||||||||||||||||||||||||
Weighted Average Common Shares Outstanding:
|
||||||||||||||||||||||||||||||||||||||
Basic
|
50,879 | 14,881 | 883 | (S) | 66,643 | (S) | ||||||||||||||||||||||||||||||||
Diluted
|
51,922 | 14,986 | 778 | (S) | 67,686 | (S) | ||||||||||||||||||||||||||||||||
Earnings per Common Share
|
||||||||||||||||||||||||||||||||||||||
Basic:
|
||||||||||||||||||||||||||||||||||||||
Income from continuing operations attributable to the combined
Company
|
$ | 1.30 | $ | 1.65 | ||||||||||||||||||||||||||||||||||
Diluted:
|
||||||||||||||||||||||||||||||||||||||
Income from continuing operations attributable to the combined
Company
|
$ | 1.28 | $ | 1.64 |
6
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL INFORMATION
CONDENSED COMBINED FINANCIAL INFORMATION
1. | Basis of Presentation |
The Unaudited Pro Forma Condensed Combined Financial Information
has been prepared by GEO based on the historical financial
statements of GEO and Cornell, and the historical financial
statements and accounting records of BII Holding to reflect the
effects of the Cornell Acquisition, the BI Acquisition and
certain financing activities. The Unaudited Pro Forma Condensed
Combined Financial Information takes into consideration
adjustments that are directly attributable to the Cornell
Acquisition and the BI Acquisition, including certain financing
activities, and are expected to have a continuing
impact and are factually supportable. The Unaudited Pro Forma
Condensed Combined Financial Information should be read in
conjunction with the historical consolidated financial
statements of GEO, Cornell and BI, including the related notes,
with GEOs Managements Discussion and Analysis
of Financial Condition and Results of Operations and with
the Unaudited Pro Forma Condensed Combined Financial
Information. The effective date of the Cornell Acquisition, the
BI Acquisition and certain financing activities is assumed to be
October 3, 2010 for purposes of preparing the Unaudited Pro
Forma Condensed Combined Balance Sheet, and December 29,
2008 for purposes of preparing the Unaudited Pro Forma Condensed
Combined Statements of Income (Loss). The unaudited pro forma
financial data included in this Form 8-K is based on
the historical financial statements of GEO and Cornell, and the
historical financial statements and accounting records of BII
Holding, on publicly available information where available and
certain assumptions that GEO believes are reasonable, which are
described in the notes to the Unaudited Pro Forma Condensed
Combined Financial Information.
2. | Acquisition of BII Holding |
On December 21, 2010, GEO entered into an Agreement and
Plan of Merger (the Merger Agreement) with BII
Holding, GEO Acquisition IV, Inc., a Delaware corporation and
wholly-owned subsidiary of GEO (Merger Sub), BII
Investors IF LP, in its capacity as the stockholders
representative, and AEA Investors 2006 Fund L.P.
(AEA). The Merger Agreement provides that, upon the
terms and subject to the conditions set forth in the Merger
Agreement, Merger Sub will merge with and into BII Holding (the
Merger), with BII Holding continuing as the
surviving corporation and a wholly-owned subsidiary of GEO.
Pursuant to the Merger Agreement, GEO will pay merger
consideration of $415.0 million in cash, subject to certain
adjustments, including an adjustment for working capital. All
indebtedness of BI under its senior term loan and senior
subordinated note purchase agreement will be repaid by BII
Holding with a portion of the $415.0 million of merger
consideration. As of September 30, 2010, approximately
$78.4 million was outstanding under the senior term loan
and $105.4 million was outstanding under the senior
subordinated note purchase agreement, excluding the unamortized
debt discount.
3. | Acquisition of Cornell |
On August 12, 2010, GEO completed its acquisition of
Cornell pursuant to a definitive merger agreement entered into
on April 18, 2010, and amended on July 22, 2010,
between GEO, GEO Acquisition III, Inc., and Cornell. Under the
terms of the merger agreement, GEO acquired 100% of the
outstanding common stock of Cornell for aggregate consideration
of $618.3 million, excluding cash acquired of
$12.9 million and including: (i) cash payments for
Cornells outstanding common stock of $84.9 million,
(ii) payments made on behalf of Cornell related to
Cornells transaction costs accrued prior to the
acquisition of $6.4 million, (iii) cash payments for
the settlement of certain of Cornells debt plus accrued
interest of $181.9 million using proceeds from GEOs
senior credit facility, (iv) common stock consideration of
$357.8 million, and (v) the fair value of stock option
replacement awards of $0.2 million. The value of the equity
consideration was based on the closing price of GEO common stock
on August 12, 2010 of $22.70. For purposes of the
accompanying Unaudited Pro Forma Condensed Combined Statements
of Income (Loss), certain adjustments have been made to present
the combined
7
companies operations as if the acquisitions had occurred
on December 29, 2008. The historical GEO financial
statement data presented in the accompanying Unaudited Pro Forma
Condensed Combined Balance Sheet includes Cornell and as such,
there are no adjustments in the Unaudited Pro Forma Condensed
Combined Balance Sheet relating to the Cornell Acquisition.
GEO is identified as the acquiring company for US GAAP
accounting purposes. Under the purchase method of accounting,
the aggregate purchase price was allocated to Cornells net
tangible and intangible assets based on their estimated fair
values as of August 12, 2010, the date of closing and the
date that GEO obtained control over Cornell. In order to
determine the fair values of a significant portion of the assets
acquired and liabilities assumed, the Company engaged third
party independent valuation specialists. For any assets acquired
and liabilities assumed for which the Company did not consider
the work of third party independent valuation specialists, the
fair value determined represents the estimated price to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants. The preliminary purchase price
allocation for Cornell, which was disclosed in GEOs
Quarterly Report on
Form 10-Q
as of and for the thirty-nine weeks ended October 3, 2010 is
presented below. This preliminary allocation of the purchase
price to identifiable net assets acquired and of the excess
purchase price to goodwill represents GEOs most current
estimate of the allocation.
Accounts receivable
|
$ | 57,761 | ||
Other current assets
|
13,176 | |||
Deferred income tax asset
|
10,934 | |||
Restricted cash and investments
|
43,183 | |||
Property and equipment
|
462,797 | |||
Intangible assets
|
77,600 | |||
Out of market lease assets
|
472 | |||
Other long-term assets
|
11,509 | |||
Total assets acquired
|
$ | 677,432 | ||
Accounts payable and accrued expenses
|
$ | (53,646 | ) | |
Fair value of non-recourse debt
|
(120,943 | ) | ||
Out of market lease liabilities
|
(24,071 | ) | ||
Deferred income tax liabilities
|
(44,009 | ) | ||
Other long-term liabilities
|
(130 | ) | ||
Total liabilities assumed
|
(242,799 | ) | ||
Total identifiable net assets
|
434,633 | |||
Goodwill
|
204,382 | |||
Fair value of Cornells net assets
|
639,015 | |||
Non-controlling interest
|
(20,700 | ) | ||
Total consideration for Cornell, net of cash acquired
|
$ | 618,315 | ||
4. | Preliminary Pro Forma and Acquisition Accounting Adjustments |
(A) For the purposes of the accompanying unaudited pro
forma condensed combined financial statements, the following
reclassifications have been made to BII Holdings
historical consolidated balance sheet to be consistent with
GEOs historical financial presentation:
| Income tax receivable, and Inventories, and Current portion of sales-type leases receivable have been reclassified to Other current assets, net; | |
| Sales-Type Leases Receivable, Net of Current Portion has been reclassified to Lease Receivables, Net of Current Portion; | |
| Rental and Monitoring Equipment, Net, and Capitalized Software, Net, have been reclassified to Property and Equipment, Net; |
8
| Deferred revenue has been reclassified to Accrued expenses and other current liabilities; | |
| Deferred Revenue and Other Liabilities and Accrued Contingent Consideration have been reclassified to Other Non-current Liabilities; and | |
| The long-term portion of BII Holdings capital leases have been reclassified to Capital Lease Obligations. |
(B) The pro forma cash balance reflects the following
sources and uses of cash in connection with the completion of
the BI Acquisition (in 000s):
Pro Forma |
||||
Adjustments | ||||
Borrowings under GEOs senior credit facility and proceeds
from issuance of the notes used to finance the BI
Acquisition
|
$ | 436,350 | ||
Cash paid in BI Acquisition(a)
|
(415,000 | ) | ||
Cash payment of financing charges
|
(9,800 | ) | ||
Cash payment of transaction costs associated with the BI
Acquisition
|
(11,550 | )(b) | ||
Net pro forma adjustment to cash
|
$ | | ||
(a) | A portion of the $415.0 million of merger consideration will be used by BII Holding to repay indebtedness of BI under its senior term loan and senior subordinated note purchase agreement. The outstanding balances of the senior term loan and senior subordinated note purchase agreement, excluding the unamortized debt discount, were $78.4 million and $105.4 million, respectively, as of September 30, 2010. | |
(b) | These costs are reflected in retained earnings and are not included in the accompanying Unaudited Pro Forma Condensed Combined Statements of Income (Loss). |
(C) To the extent these adjustments relate to tax
deductible items, the adjustment to deferred income tax assets,
net, reflects an estimated tax impact at the statutory rate of
40%.
The adjustments to current deferred income tax asset are as
follows:
Tax impact on acceleration of stock options upon change in
control
|
$ | 2,980 | ||
Tax impact on write-off of BII Holdings deferred financing
fees
|
1,658 | |||
Estimated tax deductible portion of non-recurring, direct
transaction costs
|
3,520 | |||
Total pro forma adjustments
|
$ | 8,158 | ||
(D) The purchase price was allocated to the net assets
acquired as indicated in the table below. GEO has not determined
the fair market values of BII Holdings Rental and
Monitoring Equipment, Capitalized Software or its Property and
Equipment and therefore has not reflected a fair value
adjustment to these assets. In addition, GEO has assumed that
Current Assets, Sales-type Leases Receivable, Current
Liabilities and Deferred Revenue and Other Liabilities
approximate their fair value for the purposes of the preliminary
purchase price allocation. Management has obtained an estimate
of identifiable intangible assets based on preliminary data
obtained during the due diligence process. The preliminary
purchase price allocation and the pro forma adjustments to
goodwill based on the assumptions disclosed herein are as
follows (in 000s):
9
Preliminary estimated purchase price allocation:
|
||||
Total current assets, net of cash and cash equivalents
|
$ | 36,938 | ||
Property and equipment
|
29,571 | |||
Fair value of intangible assets
|
107,400 | |||
Sales-type leases receivable, net of current portion
|
4,189 | |||
Other non-current assets
|
289 | |||
Total assets acquired
|
$ | 178,387 | ||
Total current liabilities
|
$ | (9,871 | ) | |
Deferred income tax liabilities
|
(37,709 | ) | ||
Other non-current liabilities
|
(10,727 | ) | ||
Long-term debt and capital lease obligations, including current
portion of debt
|
(2,025 | ) | ||
Total liabilities assumed
|
$ | (60,332 | ) | |
Net assets acquired
|
118,055 | |||
Goodwill
|
291,811 | |||
Acquisition consideration, net of cash acquired
|
$ | 409,866 | ||
Pro forma adjustments to goodwill:
|
||||
Elimination of BII Holdings goodwill as of
September 30, 2010
|
$ | (169,941 | ) | |
Excess of purchase price over fair value of assets acquired and
liabilities assumed
|
291,811 | |||
Total pro forma adjustments
|
$ | 121,870 | ||
(E) This adjustment reflects the elimination of the net
carrying value of BII Holdings intangible assets and the
addition of estimated fair value of the identifiable intangible
assets acquired in the transaction. In order to estimate a fair
value of the acquired intangible assets, GEO considered the work
performed by a third party valuation specialist based on
preliminary information acquired during the due diligence
process. The estimated fair values of the identifiable
intangible assets will be finalized subsequent to the close of
the transaction and any such valuation established by a complete
analysis may be materially different from the amounts used in
the accompanying pro forma financial statements. The adjustments
to intangible assets are as follows (in 000s):
Pro Forma |
||||||
Adjustments | Useful life | |||||
Elimination of the net carrying value of BII Holdings
intangible assets, net, as of September 30, 2010
|
$ | (107,257 | ) | |||
Fair value of finite lived identifiable intangible assets
acquired:
|
||||||
Customer relationships
|
56,900 | 1 to 15 years | ||||
Developed technology
|
17,500 | 7 years | ||||
Non-compete agreements
|
1,700 | 2 years | ||||
Fair value of indefinite lived identifiable intangible assets
acquired:
|
||||||
Trade Name
|
31,300 | Indefinite | ||||
Total pro forma adjustments
|
$ | 143 | ||||
(F) GEOs Other Non-Current Assets and BII Holding
Deferred Financing Fees reflect an adjustment to write-off
$4.1 million of BII Holdings existing deferred
financing fees and an adjustment to record GEOs estimated
deferred financing fees of $9.8 million associated with
certain financing activities.
10
(G) The net increase in the current portion of long term
debt reflects the following adjustments (in 000s):
Pro Forma |
||||
Adjustments | ||||
Current portion of GEO Term loan A-2 expected to be due May 2011
|
$ | 1,875 | ||
Elimination of the net carrying value of the current portion of
BII Holdings debt not assumed, as of September 30,
2010
|
(147 | ) | ||
$ | 1,728 | |||
(H) The adjustments to Deferred Income Tax Liabilities are
calculated using GEOs domestic estimated statutory income
tax rate, and are as follows (in 000s):
Pro Forma |
||||
Adjustments | ||||
Elimination of the estimated deferred income tax liabilities
associated with BII Holdings intangible assets
|
$ | (43,414 | ) | |
Intangible assets giving rise to deferred tax assets:
|
||||
Fair value of customer relationships
|
56,900 | |||
Fair value of trade names acquired
|
31,300 | |||
Fair value of developed technology acquired
|
17,500 | |||
Fair value of non-compete agreements
|
1,700 | |||
107,400 | ||||
Domestic estimated statutory income tax rate
|
40.00 | % | ||
Pro forma deferred tax liabilities on acquired intangibles
|
42,960 | |||
Pro forma deferred tax liabilities adjustment
|
$ | (454 | ) | |
(I) The increase to Long-Term Debt reflects the following
pro forma adjustments assuming the BI Acquisition was completed
as of October 3, 2010 (in 000s):
Pro Forma |
||||
Adjustments | ||||
Repayment of BII Holdings long-term debt
|
$ | (180,508 | ) | |
Incremental debt to GEO to finance the BI Acquisition and
related costs:
|
||||
Proceeds from Revolver
|
36,350 | |||
Proceeds from New Term Loan
A-2, net of
current portion
|
148,125 | |||
Proceeds from the notes used to finance the BI Acquisition
|
250,000 | |||
$ | 253,967 | |||
11
(J) The following reflects the pro forma adjustments to
Shareholders Equity (in 000s):
Pro Forma Adjustments (in 000s) | ||||||||||||||||
Accumulated |
Additional paid-in |
Total pro |
||||||||||||||
Common stock | Earnings (Deficit) | capital | forma | |||||||||||||
Non-recurring transaction costs, net of tax, not considered in
the Unaudited Pro Forma Condensed Combined Statements of Income
|
$ | | $ | (8,030 | ) | $ | | $ | (8,030 | ) | ||||||
Acceleration of stock options upon change in control
|
| (7,449 | ) | 7,449 | | |||||||||||
Tax impact of acceleration of stock options upon change in
control
|
| 2,980 | | 2,980 | ||||||||||||
Elimination of equity in purchase accounting, after acceleration
of stock options
|
(12 | ) | 26,229 | (140,581 | ) | (114,364 | ) | |||||||||
$ | (12 | ) | $ | 13,730 | $ | (133,132 | ) | $ | (119,414 | ) | ||||||
(K) Cornells Pre-opening and start-up expenses were
reclassified to GEOs Operating Expenses to be consistent
with GEOs historical presentation.
(KK) For the purposes of the accompanying Unaudited Pro
Forma Condensed Combined Financial Statements, the
reclassifications described in the tables below have been made
to BII Holdings historical statements of income to be
consistent with GEOs historical presentation. For the
purposes of the table below:
(a) Selling, General and Administrative Expenses have been
reclassified into GEOs Operating Expenses and GEOs
General and Administrative Expenses.
(b) Research and Development Expenses have been
reclassified into GEOs General and Administrative Expenses.
(c) Provision for Doubtful Accounts have been reclassified
into GEOs General and Administrative Expenses.
(d) Amortization and Depreciation have been reclassified
into GEOs consolidated line item.
(e) Interest Income from Interest Expense, net has been
reclassified into GEOs Interest Income line item.
Reclassifications |
||||||||||||||||||||||||
Nine Months |
||||||||||||||||||||||||
Ended |
||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | September 30, 2010 | |||||||||||||||||||
Operating expenses
|
$ | 6,562 | $ | | $ | | $ | (9,252 | ) | $ | | $ | (2,690 | ) | ||||||||||
Provision for doubtful accounts
|
| | (468 | ) | | | (468 | ) | ||||||||||||||||
Depreciation and Amortization
|
| | | 17,729 | | 17,729 | ||||||||||||||||||
Research and Development Expenses
|
| (2,052 | ) | | | | (2,052 | ) | ||||||||||||||||
General and Administrative expenses
|
8,461 | 2,052 | 468 | (50 | ) | | 10,931 | |||||||||||||||||
Selling, General and Administrative expenses
|
(15,023 | ) | | | (8,427 | ) | | (23,450 | ) | |||||||||||||||
Interest income
|
| | | | (2 | ) | (2 | ) | ||||||||||||||||
Interest expense
|
$ | | $ | | $ | | $ | | $ | 2 | $ | 2 |
12
Reclassifications |
||||||||||||||||||||||||
Nine Months |
||||||||||||||||||||||||
Ended |
||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | September 30, 2009 | |||||||||||||||||||
Operating expenses
|
$ | 7,905 | $ | | $ | | $ | (11,380 | ) | $ | | $ | (3,475 | ) | ||||||||||
Provision for doubtful accounts
|
| | (620 | ) | | | (620 | ) | ||||||||||||||||
Depreciation and Amortization
|
| | | 22,374 | | 22,374 | ||||||||||||||||||
Research and Development Expenses
|
| (2,052 | ) | | | | (2,052 | ) | ||||||||||||||||
General and Administrative expenses
|
8,959 | 2,052 | 620 | (109 | ) | | 11,522 | |||||||||||||||||
Selling, General and Administrative expenses
|
(16,864 | ) | | | (10,885 | ) | | (27,749 | ) | |||||||||||||||
Interest income
|
| | | | (10 | ) | (10 | ) | ||||||||||||||||
Interest expense
|
$ | | $ | | $ | | $ | | $ | 10 | $ | 10 |
Reclassifications |
||||||||||||||||||||||||
Year Ended |
||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | December 31, 2009 | |||||||||||||||||||
Operating expenses
|
$ | 11,536 | $ | | $ | | $ | (14,857 | ) | $ | | $ | (3,321 | ) | ||||||||||
Provision for doubtful accounts
|
| | (820 | ) | | | (820 | ) | ||||||||||||||||
Depreciation and Amortization
|
| | | 28,770 | | 28,770 | ||||||||||||||||||
Research and Development Expenses
|
| (2,490 | ) | | | | (2,490 | ) | ||||||||||||||||
General and Administrative expenses
|
12,230 | 2,490 | 820 | (125 | ) | | 15,415 | |||||||||||||||||
Selling, General and Administrative expenses
|
(23,766 | ) | | | (13,788 | ) | | (37,554 | ) | |||||||||||||||
Interest income
|
| | | | (11 | ) | (11 | ) | ||||||||||||||||
Interest expense
|
$ | | $ | | $ | | $ | | $ | 11 | $ | 11 |
(L) Pro forma revenue and Operating Expenses for the
periods presented reflect the elimination of rental income and
rental expense related to a facility that is owned by GEO and
was leased to Cornell prior to the acquisition of Cornell in
August 2010.
(M) The pro forma adjustments to Operating Expenses for the
pro forma periods presented in the table below represent
adjustments for the rental expense discussed in (L) above and
also adjustments to rental expense for the amortization of the
out-of-market
leases acquired from Cornell in August 2010 as follows (in
000s):
Pro Forma Adjustments | ||||||||||||
Thirty-Nine |
Thirty-Nine |
|||||||||||
Weeks |
Weeks |
Fiscal |
||||||||||
Ended |
Ended |
Year Ended |
||||||||||
October 3, |
September 27, |
January 3, |
||||||||||
2010 | 2009 | 2010 | ||||||||||
Pro forma adjustments to Operating Expense:
|
||||||||||||
Intercompany rent expense elimination
|
$ | 1,078 | $ | 1,281 | $ | 1,708 | ||||||
Elimination of non-recurring operating costs
|
$ | 3,147 | | | ||||||||
Amortization of liability for unfavorable market lease positions
|
1,847 | 1,933 | 2,577 | |||||||||
$ | 6,072 | $ | 3,214 | $ | 4,285 | |||||||
13
(N) Pro forma Depreciation and Amortization for the periods
presented in the table below reflects the following adjustments
for Cornell (in 000s):
Pro Forma Adjustments | ||||||||||||
Thirty-Nine |
Thirty-Nine |
Fiscal |
||||||||||
Weeks Ended |
Weeks Ended |
Year Ended |
||||||||||
October 3, |
September 27, |
January 3, |
||||||||||
2010 | 2009 | 2010 | ||||||||||
Elimination of Cornells Depreciation and Amortization
Expense
|
$ | (11,359 | ) | $ | (14,093 | ) | $ | (18,833 | ) | |||
Amortization of identifiable amortizable intangible assets:
|
||||||||||||
Facility management contracts acquired
|
3,445 | 4,214 | 5,619 | |||||||||
Non-compete agreements
|
1,440 | 2,513 | 3,350 | |||||||||
Depreciation of fair value of acquired Property and Equipment
|
10,152 | 11,990 | 15,986 | |||||||||
Pro forma adjustment to Depreciation and Amortization expense
|
$ | 3,678 | $ | 4,624 | $ | 6,122 | ||||||
(NN) Pro forma Depreciation and Amortization for the
periods presented in the table below reflects the following
adjustments for BII Holding (in 000s):
Pro Forma Adjustments | ||||||||||||
Thirty-Nine |
Thirty-Nine |
Fiscal |
||||||||||
Weeks Ended |
Weeks Ended |
Year Ended |
||||||||||
October 3, |
September 27, |
January 3, |
||||||||||
2010 | 2009 | 2010 | ||||||||||
Elimination of BII Holdings amortization expense
|
$ | (9,042 | ) | $ | (10,751 | ) | $ | (13,833 | ) | |||
Amortization of identifiable amortizable intangible assets:
|
||||||||||||
Customer relationships
|
2,923 | 2,999 | 3,999 | |||||||||
Non-compete agreements
|
638 | 637 | 850 | |||||||||
Developed technology
|
1,875 | 1,875 | 2,500 | |||||||||
Pro forma adjustment to Depreciation and Amortization expense
|
$ | (3,606 | ) | $ | (5,240 | ) | $ | (6,484 | ) | |||
GEO has not completed its fair value assessment with regards to
the fair value of the identifiable intangible assets acquired
from BII Holding. Management believes the only other significant
items besides the identifiable intangible assets that may have a
fair value adjustment are Rental and Monitoring Equipment,
Property and Equipment and Capitalized Software. Upon
preliminary review of these capitalized assets, management
concluded that the current book value approximated fair value
based on the observations that BII Holding has made recent fair
value assessments. Additionally, management has not reported any
significant impairments of its fixed assets as of their most
recent financial statements. The finalization of fair value
assessments may have a material impact on GEOs financial
position and results of operations in the periods following the
acquisition.
The following table presents the impact of a 10% increase or
decrease to GEOs preliminary estimated fair value of BII
Holdings identifiable intangible assets and fixed assets
assuming a 3-year remaining useful life as of and for the
thirty-nine weeks ended October 3, 2010 (in 000s):
14
Selected from |
||||||||||||
Pro Forma Financial |
Sensitivity Analysis | |||||||||||
Information | -10% | 10% | ||||||||||
Property and Equipment, Net
|
$ | 29,571 | $ | 26,614 | $ | 32,528 | ||||||
Intangible Assets
|
$ | 107,400 | $ | 96,660 | $ | 118,140 | ||||||
Pro forma Depreciation and Amortization
|
$ | 14,123 | $ | 11,546 | $ | 14,112 |
(O) The table below reflects the elimination of
non-recurring transaction costs incurred by Cornell and GEO
during the thirty-nine weeks ended October 3, 2010 (in
000s):
Pro Forma |
||||
adjustments | ||||
GEO transaction costs:
|
||||
Legal and consulting fees
|
$ | 10,550 | ||
Administrative and printing costs
|
5,138 | |||
Cornell transaction costs:
|
||||
Legal and consulting fees
|
8,917 | |||
Stock based compensation expense
|
5,232 | |||
Change of control payments
|
5,183 | |||
Other non-recurring compensation costs
|
1,649 | |||
Total non-recurring transaction costs
|
$ | 36,669 | ||
(P) Pro forma adjustments to Interest Expense relating to
the Cornell Acquisition are as follows (in 000s):
Pro Forma Adjustments | ||||||||||||
Thirty- |
Thirty- |
|||||||||||
Nine Weeks |
Nine Weeks |
Fiscal |
||||||||||
Ended |
Ended |
Year Ended |
||||||||||
October 3, |
September 27, |
January 3, |
||||||||||
2010 | 2009 | 2010 | ||||||||||
Elimination of the interest expense incurred by Cornell for
indebtedness repaid in connection with the acquisition by GEO
|
$ | (9,092 | ) | $ | (11,685 | ) | $ | (15,417 | ) | |||
Pro forma interest expense incurred by GEO as a result of the
Cornell Acquisition:
|
||||||||||||
Interest expense related to incremental debt of
$84.9 million, including amortization of deferred financing
fees (a)
|
4,976 | 6,494 | 8,847 | |||||||||
Amortization of debt discount related to variable interest
entity acquired in the Cornell Acquisition
|
423 | 550 | 735 | |||||||||
Pro forma adjustment Decrease to interest expense
|
$ | (3,693 | ) | $ | (4,641 | ) | $ | (5,835 | ) | |||
(a) Assumes weighted average interest rates of 3.29%, 3.42%
and 3.41% for the thirty-nine weeks ended October 3, 2010,
thirty-nine weeks ended September 27, 2009 and fiscal year
ended January 3, 2010, respectively. Based on these
incremental borrowings, every one percent change in the weighted
average interest rate would cause our annual interest rate
expense to change by $2.7 million.
15
(PP) Pro forma adjustments to interest expense relating to
the BI Acquisition are as follows (in 000s):
Pro Forma Adjustments | ||||||||||||
Thirty-Nine |
Thirty-Nine |
Fiscal Year |
||||||||||
Weeks Ended |
Weeks Ended |
Ended |
||||||||||
October 3, |
September 27, |
January 3, |
||||||||||
2010 | 2009 | 2010 | ||||||||||
Elimination of the interest expense incurred by BII Holding for
indebtedness repaid in connection with the acquisition by
GEO |
$ | (15,018 | ) | $ | (14,633 | ) | $ | (19,606 | ) | |||
Pro forma interest expense incurred by GEO as a result of the BI
Acquisition(a)
|
18,508 | 19,972 | 26,626 | |||||||||
Pro forma adjustment Increase to interest expense
|
$ | 3,490 | $ | 5,339 | $ | 7,020 | ||||||
(a) Assumes weighted average interest rates of 6.01%, 6.38%, and
6.34%, respectively, based on (i) our existing Term Loan A,
the incremental term loan, borrowings under the revolving credit
facility and the notes used to finance the BI Acquisition, during these periods, and
(ii) the interest expense incurred as a result of the fact
that our increased leverage pro forma for the BI Acquisition
will cause a 0.25% increase in the interest rate on our
pre-existing
term loans and historical borrowings under the revolving credit
facility. Based on these borrowings for these periods, excluding
the notes used to
finance the BI Acquisition, every one percent change in the
weighted average interest rate applicable to the existing Term
Loan A, the incremental term loan and borrowings under the
revolving credit facility would cause our interest expense to
change by $2.4 million, $2.0 million, and
$2.7 million, respectively. Every one percent change in the
interest rate applicable to the notes used to finance the BI Acquisition would cause
our annual interest rate expense to change by $2.5 million.
(Q) The provision for income taxes has been adjusted for
the impact of the recurring pro forma adjustments using
GEOs domestic estimated statutory tax rate of 40%.
(R) Adjustments to noncontrolling interests are as follows
(in 000s):
Pro Forma Adjustments | ||||||||||||
Thirty-Nine |
Thirty-Nine |
Fiscal Year |
||||||||||
Weeks Ended |
Weeks Ended |
Ended |
||||||||||
October 3, |
September 27, |
January 3, |
||||||||||
2010 | 2009 | 2010 | ||||||||||
Pro forma change in the fair value of debt, after tax
|
$ | (254 | ) | $ | (330 | ) | $ | (442 | ) | |||
Pro forma change in depreciation, after tax
|
(205 | ) | (191 | ) | (264 | ) | ||||||
Total pro forma adjustments to noncontrolling interest
|
$ | (459 | ) | $ | (521 | ) | $ | (706 | ) | |||
(S) GEOs basic and diluted EPS assumes shares of GEO
common stock are exchanged for shares of Cornell common stock at
a ratio of 1.3 shares of GEO common stock for each share of
Cornell common stock for 80% of the total purchase price. The
pro forma shares are calculated as follows (in 000s):
Pro forma combined |
||||||||||||||||
Thirty-Nine |
||||||||||||||||
Historical |
Pro forma |
Weeks Ended |
||||||||||||||
GEO | Cornell | adjustments | October 3, 2010 | |||||||||||||
Weighted average common shares
|
(14,903 | ) | ||||||||||||||
outstanding
|
52,428 | 14,903 | 15,764 | 68,192 | ||||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Employee and director stock options and restricted stock
|
616 | 147 | (147 | ) | 616 | |||||||||||
Weighted average diluted shares
|
53,044 | 15,050 | 714 | 68,808 | ||||||||||||
16
Pro forma combined |
||||||||||||||||
Thirty-Nine |
||||||||||||||||
Historical |
Pro forma |
Weeks Ended |
||||||||||||||
GEO | Cornell | adjustments | September 27, 2009 | |||||||||||||
Weighted average common shares
|
(14,880 | ) | ||||||||||||||
outstanding
|
50,800 | 14,880 | 15,764 | 66,564 | ||||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Employee and director stock options and restricted stock
|
1,047 | 88 | (88 | ) | 1,047 | |||||||||||
Weighted average diluted shares
|
51,847 | 14,968 | 796 | 67,611 | ||||||||||||
Pro forma combined |
||||||||||||||||
Fiscal |
||||||||||||||||
Historical |
Pro forma |
Year Ended |
||||||||||||||
GEO | Cornell | adjustments | January 3, 2010 | |||||||||||||
Weighted average common shares
|
(14,881 | ) | ||||||||||||||
outstanding
|
50,879 | 14,881 | 15,764 | 66,643 | ||||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Employee and director stock options and restricted stock
|
1,043 | 105 | (105 | ) | 1,043 | |||||||||||
Weighted average diluted shares
|
51,922 | 14,986 | 778 | 67,686 | ||||||||||||
(T) The pro forma adjustment reflects the elimination of
annual management fees paid to AEA Investors by BII Holding that
will be discontinued upon completion of the BI Acquisition.
Management fees paid were $0.9 million, $0.9 million and
$1.3 million for the nine months ended September 30,
2010, nine months ended September 30, 2009 and twelve
months ended December 31, 2009, respectively.
17