The Geo Group, Inc. (GEO), which operates private jails in the U.S., the U.K., Australia, and South Africa, has been awarded several new contracts lately to house inmates at its various facilities. The new revenue will be helpful, because the company has an expensive retirement check to write in the near future, and it may have some additional tax liabilities to Uncle Sam.
In the 10-Q that the Geo Group filed last week, the company disclosed that when Wayne H. Calabrese, Vice Chairman, President and Chief Operating Officer, retires on December 31, 2010, he’ll be receiving some serious cash. The filing said:
“As a result of his retirement, we will pay $4.5 million in discounted retirement benefits under his non-qualified deferred compensation agreement, including a gross up of $1.7 million for certain taxes as specified in the deferred compensation agreement. We plan to use cash on hand to make this payment.”
The filing also noted that during the 13 weeks ending Oct. 3, the Geo Group had repurchased 381,460 shares from Calabrese for $8.6 million. Calabrese will retain his ties to the company, though. Starting Jan. 3, 2011, he’ll work as a consultant (for terms that have yet to be disclosed).
Of course, it has already been an expensive year for the Geo Group because of its recent acquisition of Houston-based Cornell Companies, Inc., another company that operates prisons, for more than $618 million. And it repurchased stock from others besides Calabrese, paying an aggregate of $22.3 million to buy 1,055,180 shares during the 39 weeks ending Oct. 3.
The potential tax liability relates to a dispute with the IRS that is currently on appeal. If the Geo Group loses, it has a “potential tax exposure… of $15.4 million.” But the filing adds that the company believes in the merits of its position and plans to defend itself vigorously. Yet if it loses, it warns that there could be “a material adverse effect on our financial position, results of operations and cash flows.”
That warning could just be in the 10-Q out of an abundance of caution, though. The Geo Group is paying Calabrese’s retirement funds out of cash on hand, after all, and prison overcrowding continues to be an expensive problem for most states, especially California and Texas, where Geo operates 26 jails and correctional facilities.
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