I would now like to turn the conference over to Pablo Paez, Executive Vice President of Corporate Relations. Please go ahead.
Thank you, Operator. Good morning, everyone, and thank you for joining us for today's discussion on The GEO Group's Second Quarter 2021 Earnings Results. With us today are George Zoley, Executive Chairman of the Board, Jose Gordo, Chief Executive Officer, Brian Evans, Chief Financial Officer, Ann Schlarb, President of GEO Care, and James Black, President of GEO Secure Services. This morning, we will discuss our second quarter 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.geogroup.com. Today, we will discuss non-GAAP basis information. A reconciliation for non-GAAP basis information to GAAP basis results is included in the press release and supplemental disclosure we issued this morning.
Much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the safe harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings, including the Form 10-K, 10-Q, and 8-K reports. With that, please allow me to turn this call over to our Executive Chairman, George Zoley. George?
Thank you, Pablo. Good morning to everyone. It is my pleasure to welcome our new Chief Executive Officer , Jose Gordo, and our new president of GEO Secure Services, James Black, who are joining Brian and myself on today's call. We are pleased with our strong second quarter results and our increased financial guidance for the full year. We believe our financial performance during the second quarter is representative of the resiliency and strength of our diversified business segments. Our better-than-expected performance was driven by continued favorable cost trends, as well as higher occupancies at our U.S. Marshals and ICE facilities, and increased revenue and earnings from our electronic monitoring segment. Since the end of the first quarter, the census at our U.S. Marshals facilities has increased by approximately 10%, and the overall census at our ICE facilities has increased by approximately 100% during the same period.
With respect to the Bureau of Prisons, we completed the previously announced transition of our Great Plains correctional facility to an idle status in May of 2021. We are actively marketing our Great Plains facility and our other idle facilities for use by other state and federal agencies. As we highlighted previously, the President issued an executive order in January of this year, directing the U.S. Attorney General not to renew Department of Justice contracts with privately operated criminal detention facilities. Our base case assumption continues to be that our remaining BOP prison contracts will not be renewed, resulting in two additional BOP correctional facilities closing in November 2021. It is important to note that during the second quarter of 2021, we successfully renewed five BOP reentry contracts, which are not expected to be impacted by the executive order.
In fact, we are pleased to have been recently awarded a new BOP contract for a reentry center in the Tampa area, which is the first new BOP residential reentry contract awarded to GEO in several years. With respect to the U.S. Marshals Service, we are continuing to cooperate with the agency in assessing various alternatives on how to comply with the executive order, which appears to be focused on direct contracts with private sector service providers. The U.S. Marshals do not own or operate facilities and instead contract for capacity primarily through intergovernmental agreements and, to a lesser extent, direct contracts. We operate three facilities that are under direct contracts and nine facilities that are under intergovernmental agreements with the U.S. Marshals.
Despite the challenges of the COVID pandemic and the impact of the executive order on our BOP prison contracts, we are pleased with the strong performance of our diversified business segments. We are proud of our frontline employees who have demonstrated significant strength and dedication over the past year and a half. They have continued to provide humane and compassionate care to all those entrusted to our facilities and programs. Understanding the challenges our government agency partners face in carrying out their missions during a pandemic, we invested significant resources to mitigate the impact of COVID-19, including $2 million in 45 Abbott Rapid Testing devices and $3.7 million in bipolar ionization air purification systems. We recognize that in addition to the challenges that I just discussed, there have been certain concerns regarding our future access to financing. We have adopted a proactive and multifaceted approach to address these challenges.
We believe these initiatives are in the best interest of our shareholders and our other stakeholders as we work to address our debt maturities and enhance long-term shareholder value. At this time, I'll turn the call over to Brian Evans to address these initiatives in more detail and review our results and guidance.
Thank you, George. Good morning, everyone. Today, we reported second quarter revenues of approximately $565 million and net income attributable to GEO of $42 million. Our second quarter results include $7.5 million pre-tax in one-time employee restructuring expenses, a $3 million pre-tax loss on real estate assets, and a $1.7 million pre-tax gain on the extinguishment of debt, and $100,000 in the tax effect of adjustments to net income attributable to GEO. Excluding these items, we reported second quarter adjusted net income of $0.42 per diluted share and AFFO of $0.71 per diluted share. Our better-than-expected performance during the second quarter was driven by continued favorable cost trends, higher occupancies at our U.S. Marshals and ICE facilities, and increased revenue and earnings from our electronic monitoring segment. Moving to our outlook, we have increased our full year 2021 financial guidance to reflect these better than expected results.
We expect full year 2021 net income attributable to GEO to be in a range of $167.5 million-$174.5 million on a full year 2021 revenues of approximately $2.23 billion. We expect full year 2021 adjusted net income to be in a range of $1.34-$1.40 per diluted share. We expect full year 2021 AFFO to be in a range of $2.51-$2.57 per diluted share. We expect full year 2021 adjusted EBITDA to be in a range of $441.5 million-$448.5 million. As we had previously guided, our 2021 projections account for the expected non-renewal of two additional BOP prison contracts, the Big Spring and Flightline facilities in Texas, which have options periods expiring at the end of November.
For the third quarter of 2021, we expect net income attributable to GEO to be in a range of $39 million-$42 million on quarterly revenues of $548 million-$553 million. We expect third quarter 2021 AFFO to be between $0.62 and $0.64 per diluted share. For the fourth quarter of 2021, we expect net income attributable to GEO to be in a range of $36 million-$40 million on quarterly revenues of $538 million-$543 million. We also expect fourth quarter 2021 AFFO to be between $0.59 and $0.63 per diluted share. Moving to our capital structure. At the end of the second quarter, we had approximately $483 million in cash on hand, resulting from the previously announced drawdown of our revolving credit facility.
Our decision to draw on our revolver was a conservative precautionary step to preserve liquidity, maintain financial flexibility, and obtain additional funds for general corporate purposes. We will revisit the revolver drawdown at the end of the next quarter. Accounting for our $483 million of cash on hand, our net recourse debt currently stands at $2.1 billion, not including non-recourse debt, finance lease obligations, or the mortgage on our corporate headquarters. With our current cash on hand and improving financial outlook, we expect to continue to proactively examine our options to address our funded recourse debt in due course, including our near-term maturities, which encompass our 2023 and 2024 senior unsecured notes and our senior secured credit facility. Our earnings and cash flows have continued to exceed our prior expectations, and we believe we will be able to address our debt maturities in due course on reasonable terms.
We recognize there have been concerns regarding our future access to financing. We have adopted a proactive approach to address this concern as we continue to focus on debt reduction and de-leveraging. In 2020, we reduced our net recourse debt by approximately $100 million. During the first half of 2021, we further reduced net recourse debt by approximately $105 million, representing significant progress toward our previously articulated goal of reducing net recourse debt by between $125 million and $150 million in 2021. We intend to remain focused on debt reduction and de-leveraging during the second half of the year.
Given our improved financial performance, we are increasing our target range for net recourse debt reduction to at least $150 million-$175 million in 2021. Our multifaceted strategy also includes various initiatives we have previously announced, including our exploration of potential asset sale opportunities and our engagement of financial and legal advisors to assist us in reviewing capital structure alternatives. As mentioned on prior earnings call, we suspended our quarterly dividend as our board continues to study our corporate tax structure. We expect to conclude our evaluation in the fourth quarter of 2021, and if we decide to maintain our REIT status, an additional dividend payment may be required before year-end in order to meet the minimum REIT distribution requirements under the tax code. The substantial majority of such dividend would be paid in stock, and the remainder would be paid in cash.
With respect to asset sales, during the first half of the year, we completed the sale of three real estate assets in our GEO Care segment, totaling approximately 700 beds. On July 1st, we also completed the sale of certain non-real estate assets in our GEO Youth Services segment. On a combined basis, these sales generated net proceeds of approximately $27 million. At this time, I will turn the call over to James Black for a review of our GEO Secure Services segment.
Thank you, Brian. Good morning, everyone. It is my pleasure to join you today to provide an update on our GEO Secure Services business unit. During the first half of 2021, our frontline employees have continued to address the ongoing challenges associated with the COVID-19 pandemic. Throughout the global pandemic, we have implemented several mitigation initiatives. Our Secure Services facilities put in place policies and controls consistent with guidance issued by the Centers for Disease Control and Prevention, including practices and procedures related to quarantine, cohorting, and medical isolation. We continue to exercise paid leave and paid time off policies to allow our employees to remain home as needed. We have made face masks and cleaning supplies available to all of our facilities.
We made a significant investment of $2 million to deploy Abbott Rapid Testing devices across our facilities, which has allowed us to screen new arrivals at intake so that positive COVID-19 cases can be properly quarantined and isolated. Through the end of the second quarter, we had administered over 137,000 COVID tests at our Secure Services facilities. We also invested $3.7 million to install bipolar ionization systems at select Secure Services facilities to reduce the spread of airborne bacteria and viruses. Over the course of this year, we have been working closely with our government agency partners and local health departments to make vaccinations available at all of our facilities. At the end of the second quarter, over 26,000 COVID vaccinations had been administered at our Secure Services facilities.
We are continuously evaluating our mitigation steps and will make adjustments based on updated guidance by the CDC and other best practices. With respect to our recent operational activity, in May, we completed the previously announced ramp down and deactivation of our Great Plains BOP facility in Oklahoma. As we have discussed, in January of this year, the President issued an executive order directing the U.S. Attorney General to not renew Department of Justice contracts with privately operated criminal detention facilities. As a result, we continue to prepare operationally with the expectation that our remaining prison contracts with the BOP will not be renewed when the current option periods expire, including our Big Spring and Flightline facilities in Texas, which expire at the end of November 2021. During the second quarter, we experienced an increase in census levels across our U.S. Marshals and ICE facilities.
As we have noted previously, unlike the BOP, the U.S. Marshals do not own and operate their facilities. The U.S. Marshals contract for bed capacity, which is generally located in areas near federal courthouses to house pretrial offenders who have been charged with federal crimes. The U.S. Marshals contract for facilities primarily through intergovernmental agreements and, to a lesser extent, direct contracts. We currently operate three detention facilities that are under direct contracts and nine detention facilities that are under intergovernmental agreements with the U.S. Marshals. The three direct contracts are up for renewal at various times over the next few years, including 1 in late 2021. We are cooperating with the U.S. Marshals to assess various alternatives on how to comply with the executive order, which appears to be focused on direct contracts.
With respect to our ICE processing centers, the executive order did not cover agencies outside of the Department of Justice. Our ICE processing centers are highly rated by national accreditation organizations and provide high-quality services in a safe and humane environment. All those entrusted to our care are provided culturally sensitive meals approved by a registered dietitian, clothing, 24/7 access to healthcare services, and full access to telephones and legal services. Recreational amenities at our ICE processing centers include.
Following a protest of the procurement, we were able to retain the management contract for the Moore Haven facility and will transition the Graceville and Bay contracts during the third quarter. Finally, with respect to new procurements, we will be responding to the State of Arizona, which has issued a request for proposal for up to 2,700 beds.
GEO Care business unit. During the first half of the year, our facilities and our employees have remained focused on our COVID-19 mitigation strategies. All of our residential facilities have put in place quarantine and cohorting policies and additional entry screening measures. We have focused our efforts on increased sanitation, testing, and deploying face masks. Our employees on updated guidance by the CDC and other best practices. Despite the challenging operational environment, our employees have continued to strive to deliver high-quality rehabilitation successfully renewed 14 residential reentry contracts totaling more than 2,300 beds, including five reentry contracts with the Federal Bureau of Prisons. 2021. This represents the first new BOP residential reentry contract awarded to GEO Care in several years. With respect to our GEO Youth Services. Included the sale of certain non-real estate assets for a total consideration of approximately $10 million.
This sale resulted in the assignment of our Youth Services management contracts to the independent not-for-profit entity. GEO Care retained the ownership of our Youth Services real estate assets and has entered into lease agreements for the six company-owned. Sequentially from the first quarter of 2021. We remain optimistic regarding future growth opportunities for BI, which provides a full suite of electronic monitoring. The GEO Continuum of Care program, which integrates enhanced in-custody rehabilitation, including cognitive behavioral treatment, with post-release support services such as transitional housing, transportation, clothing, food, and job placement assistance. Our GEO Continuum of Care program is part of GEO's contribution to criminal justice reform. The program is not in competition or in conflict with other national initiatives regarding offender sentencing reforms. In fact, we applaud these efforts. Our efforts seek to draw.
We're also going to have further investment in our Ford+ plan as we launch our new products, and we continue to focus on our customers through connectivity and digital services.
To pursue additional quality growth opportunities. At this time, I'll turn the call to our new Chief Executive Officer, Jose Gordo, for closing remarks.
Thanks, Ann. It's my pleasure to join George- Those foundational strengths with the disruptive technologies and our new capabilities, we're going to create those always-on relationships with customers around the globe, provide. Despite the challenges associated with the COVID-19 pandemic and the recent federal policy actions leading to the non-renewal of some of our contracts. We recognize that there have been concerns regarding our future access to. For all the other stakeholders who rely on us. Democratic and Republican administrations, and under legislative branches controlled by both parties. We believe that our company remains resilient with strong earnings and cash flows that are supported by valuable real estate assets and diversified.
Maybe just mildly extending the maturities a bit just in case rates do go the other way in the midst of impending inflationary fears. We've tried to hedge that a bit. Clearly on the asset side, we remain asset sensitive, but that world might be changing just a little bit as we change the mix in our balance sheet. Tom?
Yeah, I think we saw a $30 million decline in total deposits this quarter. Really the first decline we've had in, gosh, five, six quarters. I would suspect we'll probably see a similar decline here in Q3. Then it'll start to stabilize a bit. I just think the consumer's going to spend a little bit of the money that they have in their DDA accounts, and we've seen some of our businesses start to spend a little bit of their liquidity.
We've seen some of these lower occupancy levels. Also I think we've seen a decline in the level of expense associated with some of the interventions or measures that we had to take to mitigate COVID. We're still experiencing those costs, but they're not as significant maybe as they were historically.
Right. Okay. Thanks on that one. Are we or have we broken through the contracts, the minimum guarantee payment levels? What are your guys' thoughts on the potential removal of Title 42 for single adults coming across the border?
With regard to Title 42, as revealed most recently in the media, I think there's been a delay. But if it is reversed, we would expect that it would increase the population levels at our ICE facilities.
Okay.
The need for separation of individuals who may be affected with COVID. We've noticed a slight uptick in our own BOP facilities. We're watching that, It's up to them, and I'm sure the COVID situation has something to do with their planning.
Okay, great. State level in the near to medium term that you guys would be looking to bid on?
Our next question comes from Mitra Ramgopal with Sidoti. Please go ahead.
Yes, hi, good morning, and thanks for taking the questions. a material effect on populations and maybe ratcheting up back of some of the expenses you might have been able to eliminate this last quarter?
Well, like I said earlier, we've assumed some of the benefit from the cost savings that we've seen, but we continue not to take all of that into account.
Could you maybe just provide a little color on the restructuring expense you showed in the quarter? The one-time employee restructuring.
That are embedded in that plan and hope to achieve those milestones within a period of objectives within 9- 12 months.
Okay. Thanks. as it relates to maybe right now. How much would you dedicate towards paying down debt, and how fast do you think you could start paying down the senior notes?
Well, as we said, this year status as a REIT, and that's part of what we're evaluating through the balance of this year, and we'll determine what we expect our leverage to look like over a three to five-year services businesses, separate contracts, RFP processes that are reentry facilities, separate contracts, and separate RFP processes. All of the electronic monitoring business is separate contracts, RFP processes.
In Colorado with, I think, approximately 300 people.
Interesting. Do you disclose the split mandates by customer anywhere, or would you?
No, our mandates are provided, I think, between our types of facilities like secure.
After the facilities, somebody for HVAC, somebody for plumbing, somebody for electrical and security devices. The primary startup costs are for people. It's hiring the people and getting them trained to take on their jobs. That usually takes 30-60 days.
You don't staff other than the maintenance crew that you discussed?
Yeah.
Okay. Just switching gears. On a dividend, what percentage would need to be in cash to maintain the REIT status, and how much could be in kind?
Well, the current rules right now, I think are at the minimum split is 80/20. You can go above that, but you can't go less than that. 20% at least has to be in cash to qualify. Maybe a little north of that, of our revenue is not tied to our real estate.
Okay. Very good. Thank you.
I'm wondering what's been driving that, and then if you can talk about what you think the outlook for those censuses are.
Driving it, is people crossing the border?
Yeah. We don't know exactly. We would assume that the border crossings have a lot.
go up, we should see a continued rise in census?
Yeah. I think so because that is wanted for crimes in the U.S., for instance, and he crossed the border, they are required by law to detain him. They can't just send him back to Mexico.
Okay.
There is a certain class of individuals that are required to be detained, and we're apparently just seeing more of them come across the border in the hopes of.
Is it the Western Regional Detention Facility, is that the next Marshals contract that is up for renewal discussion?
Yes, it is.
20% year- over- year.
Realign that contract in compliance with the president's executive order.
Along those lines, has there been any pushback on the, I guess it was the CoreCivic facility that went from a direct to, I guess a more indirect?
Yes. The State of Hawaii has issued a notice of interest indicating they want to build security prisoners and we think that will likely result in at least 2 separate locations to hold that many high security prisoners.
I think is looking for beds for kids. They recently moved some inmates out.
Alabama.
Alabama. I know. The mess in Alabama?
Alabama has been trying to develop three large-scale facilities for, I think, approximately 3,000 beds. There was a.
Huge.
Financing problem with that, and they're.
Because they've got a little federal oversight problem at the moment. What else is there? Oh, businesses. Are we exploring the possibility of?
What we said publicly is we're looking at asset sales probably in the $50 million-$100 million range, mostly related to idle facilities or underutilized assets.
Okay, perfect. All right. Thank you very much.
Our next question comes from Oren Shah.
For ATM that you announced on June 28th.
We have not used it, and we have it available to use if management sees fit or sees appropriate. I think what we said earlier is not that we wouldn't use it, just that we would prefer not to issue equity at these prices. We believe that equity is undervalued, and we're not intending to issue.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.