Cornell Companies Reports Strong Second-Quarter 2010 Results

HOUSTON, Aug. 5, 2010 (GLOBE NEWSWIRE) -- Cornell Companies, Inc. (NYSE:CRN) today reported results for the three and six months ended June 30, 2010.

James E. Hyman, Cornell's chairman, president and chief executive officer, said, "Our second quarter performance reflects the Company's continued ability to execute against our plan, both with existing operations and with preparation for the transition of our D. Ray James Prison to the Federal Bureau of Prisons (BOP) on time effective October 1^st. Looking ahead, our proposed merger with The GEO Group, Inc. should only strengthen the ability of the combined company to deliver value to our customers, employees and shareholders."

Second Quarter Results

Revenues were $103.9 million for the second quarter of 2010 as compared to $105.3 million for the same period in 2009. Much of the decrease came from the ongoing transition of our D. Ray James Prison from the Georgia Department of Corrections (GADOC) to the BOP contract (which is effective October 1, 2010). In addition, the lower revenues also reflected the termination of our management contract for our Dallas County Judicial Treatment Center in November 2009 and contracts for our two small California community correctional facilities in December 2009.  Average contract occupancy levels were 85.8 percent for our residential facilities compared with 91.1 percent in last year's second quarter.  The increase in capacity from the activation of the Hudson Correctional Facility in the fourth quarter of 2009, the capacity temporarily created by the ongoing transition of our D. Ray James Prison to the BOP, along with spare capacity at our two small facilities in California, primarily accounted for this decrease in overall occupancy.

Income from operations was $16.5 million for the second quarter of 2010 as compared to $19.6 million in the second quarter of 2009.   The second quarter of 2010 included revenues of approximately $2.7 million (or $0.10 per diluted share, after taxes) resulting from the guaranteed population contract at the Regional Correctional Center for the contract years March 26, 2007 through March 25, 2008 and March 26, 2008 through March 25, 2009. The Company incurred approximately $2.3 million of pre-tax (or $0.09 per diluted share, after taxes) advisory and other professional costs associated with the proposed merger transaction in the second quarter of 2010. For the second quarter of 2010 the Company reported net income of $5.7 million, as compared to net income of $7.6 million in last year's second quarter. For the second quarter of 2010 the Company reported income available to stockholders of $5.1 million, or $0.34 per diluted share, as compared to income available to stockholders of $7.2 million, or $0.48 per diluted share, in last year's second quarter.

Six-Months Results

For the six months ended June 30, 2010, revenues were $203.9 million as compared to $205.0 million for the first six months of 2009. The decrease was principally related to the D. Ray James Prison facility transition, and as well the available capacity at those programs (including our two small California community correctional facilities) mentioned earlier. As previously noted, the 2010 period included revenues of approximately $2.7 million resulting from the guaranteed population contract at the Regional Correctional Center for the contract years March 26, 2007 through March 25, 2008 and March 26, 2008 through March 25, 2009.

Income from operations was $29.4 million for the first six months of 2010 compared with $35.4 million in the same period in 2009.  As previously noted, the Company incurred approximately $2.3 million of advisory and other professional costs associated with the proposed merger transaction in the 2010 six month period.  Net income was $9.6 million compared with net income of $13.4 million in the previous year's first six months.  For the six months ended June 30, 2010, the Company reported income available to stockholders of $8.4 million, or $0.56 per diluted share, as compared to income available to stockholders of $12.5 million, or $0.84 per diluted share, in last year's six month period ended June 30, 2009.  The Company capitalized no interest in the first six months of 2010, compared with capitalized interest of $0.7 million (or $0.03 per diluted share, after taxes) in the first six months of 2009. 

Merger Update

As previously announced on April 19, 2010, the Company, The GEO Group Inc. (GEO) and GEO Acquisition III, Inc. entered into an agreement and plan of merger, as amended, pursuant to which Cornell will become a wholly owned subsidiary of GEO. The merger is expected to close in the third quarter of 2010, subject to receipt of GEO and Cornell stockholder approvals as well as the satisfaction of other customary closing conditions. 

Operational Outlook for Second Half of 2010

For the remainder of 2010 management notes the following major operational considerations:

• D. Ray James Transition to BOP: The Company continues the transition of its D. Ray James Prison from the GADOC inmates formerly housed there to the BOP contract effective October 1, 2010. The ramp down of the GADOC inmates was completed in July 2010. The Company expects to spend approximately $8.0 million in capital expenditures, primarily for FF&E items and facility maintenance improvements related to the older parts of the facility to prepare D. Ray James for BOP inmates. 

• Great Plains: The Company continues to serve the Arizona Department of Corrections through their use of our Great Plains facility.

• All Other Facilities: In terms of occupancies, we continue to assume that all other facilities continue with the levels previously discussed, with the exception of our small female High Plains Correctional Facility in Colorado (272 beds), which the Company now assumes will remain empty for the entire second half of 2010. 

Other major operating assumptions remain the same as previously discussed in our first quarter 2010 earnings release. Due to the previously announced agreement and plan of merger with GEO, the Company will not conduct an investor call to discuss these results or our outlook. 

This earnings release can be found on Cornell's Website under "Investor Relations – Press Releases."

About Cornell Companies

Cornell Companies, Inc. (http://www.cornellcompanies.com) is a leading private provider of corrections, treatment and educational services outsourced by federal, state and local governmental agencies.  Cornell provides a diversified portfolio of services for adults and juveniles, including incarceration and detention, transition from incarceration, drug and alcohol treatment programs, behavioral rehabilitation and treatment, and grades 3-12 alternative education in an environment of dignity and respect, emphasizing community safety and rehabilitation in support of public policy.  At June 30, 2010, the Company had 68 facilities in 15 states and the District of Columbia and a total service capacity of 21,392.

The Cornell Companies, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1468

Important Additional Information About the Transaction

This press release may be deemed to be solicitation material in respect of the proposed merger between GEO and Cornell. The proposed transaction will be submitted to the respective stockholders of GEO and Cornell for their consideration. In connection with the proposed transaction, GEO has filed with the Securities and Exchange Commission (the "SEC") a registration statement on Form S-4, as amended, that includes a definitive joint proxy statement of GEO and Cornell and that also constitutes a prospectus of GEO. The respective stockholders of the companies are urged to read the definitive Joint Proxy Statement/Prospectus and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You may obtain a free copy of the definitive Joint Proxy Statement/Prospectus, as well as other filings containing information about the companies at the SEC's web site (http://www.sec.gov). Copies of the definitive Joint Proxy Statement/Prospectus and the SEC filings that are incorporated by reference in the Joint Proxy Statement/Prospectus can be obtained, free of charge, by directing a request to Pablo E. Paez, Director, Corporate Relations, (561) 999-7306, ppaez@geogroup.com, One Park Place, Suite 700, 621 Northwest 53rd Street, Boca Raton, Florida 33487.

Participants in the Solicitation

GEO, Cornell and their respective directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding GEO's directors and executive officers is available in its Annual Report on Form 10-K for the year ended January 3, 2010, which was filed with the SEC on February 22, 2010, and its proxy statement for its 2010 annual meeting of stockholders, which was filed with the SEC on March 24, 2010, and information regarding Cornell's directors and executive officers is available in Cornell's Annual Report on Form 10-K, for the year ended December 31, 2009, which was filed with the SEC on February 26, 2010 and its Form 10-K/A, which was filed with the SEC on April 30, 2010. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, are contained in the definitive Joint Proxy Statement/Prospectus and other relevant materials filed with the SEC. You may obtain free copies of these documents as described in the preceding paragraph.

Forward-Looking Statements

Statements regarding the Company's outlook for 2010, ability to succeed, growth for 2010 and beyond, long-term demand, future earnings, completion of preparations for the BOP inmates at D. Ray James Prison, timing of the transition of the D. Ray James Prison from the GADOC inmates to the BOP contract, continued use by the Arizona Department of Corrections of our Great Plains facility, and results of operations, the anticipated benefits, and expected closing date, of the proposed merger with GEO, as well as any other statements that are not historical facts, are forward-looking statements within the meaning of applicable securities laws that involve certain risks, uncertainties and assumptions that could materially affect actual results. These include but are not limited to risks, uncertainties and assumptions associated with general economic and market conditions, including the impact governmental budgets can have on our per diem rates and occupancy, the Company's ability to perform according to its current expectations, changes in supply and demand, actions by government agencies and other third parties, access to capital and other risks and uncertainties detailed in the Company's most recent Form 10-K, the definitive Joint Proxy Statement/Prospectus filed on July 15, 2010, and as supplemented on July 22, 2010, and other filings made by us from time to time with the SEC.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from the statements made. Any forward-looking statement made by the Company in this release is current as of the date of this release. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement in light of new information, future events or otherwise, except as may be required by law.