EXHIBIT A 

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UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

FORM 10-Q 

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 

1934 

For the quarterly period ended September 30, 2018 

OR 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 

1934 

For the transition period from to 

Commission file number: 1-14260 

The GEO Group, Inc. 

(Exact name of registrant as specified in its charter) 

Florida 65-0043078

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

One Park Place, 621 NW 53rd Street, Suite 700,

Boca Raton, Florida 33487

(Address of principal executive offices) (Zip Code)

(561) 893-0101 

(Registrant’s telephone number, including area code) 

(Former name, former address and former fiscal year if changed since last report) 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 

during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing 

requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of 

Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such 

files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an 

emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 

company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer ☑ Accelerated filer ☐

Non-accelerated filer ☐ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any 

new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of November 6, 2018, the registrant had 121,796,397 shares of common stock outstanding. 

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TABLE OF CONTENTS 

PART I – FINANCIAL INFORMATION 3

ITEM 1. FINANCIAL STATEMENTS 3

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 

2018 AND 2017 3

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) FOR THE THREE AND NINE MONTHS 

ENDED SEPTEMBER 30, 2018 AND 2017 4

CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017 5

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 

2017 6

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 7

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 46

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 68

ITEM 4. CONTROLS AND PROCEDURES 68

PART II – OTHER INFORMATION 69

ITEM 1. LEGAL PROCEEDINGS 69

ITEM 1A. RISK FACTORS 69

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 69

ITEM 3. DEFAULTS UPON SENIOR SECURITIES 70

ITEM 4. MINE SAFETY DISCLOSURES 70

ITEM 5. OTHER INFORMATION 70

ITEM 6. EXHIBITS 70

SIGNATURES 71

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PART I – FINANCIAL INFORMATION 

ITEM 1. FINANCIAL STATEMENTS 

THE GEO GROUP, INC. 

CONSOLIDATED STATEMENTS OF OPERATIONS 

(Unaudited) 

FOR THE THREE AND NINE MONTHS ENDED 

SEPTEMBER 30, 2018 AND 2017 

(In thousands, except per share data) 

Three Months Ended Nine Months Ended

September 30,

2018

September 30,

2017

September 30,

2018

September 30,

2017

Revenues $ 583,530 $ 566,759 $ 1,731,956 $ 1,694,443

Operating expenses 434,806 423,134 1,299,312 1,276,286

Depreciation and amortization 31,297 31,649 94,536 92,464

General and administrative expenses 47,647 49,074 136,927 143,866

Operating income 69,780 62,902 201,181 181,827

Interest income 8,428 14,648 26,194 38,971

Interest expense (37,991) (38,719) (110,779) (109,702) 

Income before income taxes and equity in earnings of affiliates 40,217 38,831 116,596 111,096

Provision for income taxes 3,723 1,720 12,193 5,590

Equity in earnings of affiliates, net of income tax provision of $200, $77, $636 

and $1,785, respectively 2,735 1,342 7,071 4,255

Net income 39,229 38,453 111,474 109,761

Net loss attributable to noncontrolling interests 60 36 223 123

Net income attributable to The GEO Group, Inc. $ 39,289 $ 38,489 $ 111,697 $ 109,884

Weighted-average common shares outstanding:

Basic 119,681 122,251 120,567 119,356

Diluted 120,302 122,887 121,055 120,114

Net income per common share attributable to The GEO Group, Inc.:

Basic:

Net income per common share attributable to The GEO Group, Inc. – basic $ 0.33 $ 0.31 $ 0.93 $ 0.92

Diluted:

Net income per common share attributable to The GEO Group, Inc. – diluted $ 0.33 $ 0.31 $ 0.92 $ 0.91

Dividends declared per share $ 0.47 $ 0.47 $ 1.41 $ 1.41

The accompanying notes are an integral part of these unaudited consolidated financial statements. 

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THE GEO GROUP, INC. 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 

(Unaudited) 

FOR THE THREE AND NINE MONTHS ENDED 

SEPTEMBER 30, 2018 AND 2017 

(In thousands) 

Three Months Ended Nine Months Ended

September 30,

2018

September 30,

2017

September 30,

2018

September 30,

2017

Net income $ 39,229 $ 38,453 $ 111,474 $ 109,761

Other comprehensive income, net of tax:

Foreign currency translation adjustments (1,331) (179) (5,882) 2,030

Pension liability adjustment, net of tax provision (benefit) of $(894), $25, 

$(430) and $76, respectively (761) 64 (31) 175

Change in fair value of derivative instrument classified as cash flow 

hedge, net of tax provision of $271, $307, $803 and $451, respectively 1,536 1,740 4,550 2,556

Total other comprehensive income (loss), net of tax (556) 1,625 (1,363) 4,761

Total comprehensive income 38,673 40,078 110,111 114,522

Comprehensive loss attributable to noncontrolling interests 72 34 247 119

Comprehensive income attributable to The GEO Group, Inc. $ 38,745 $ 40,112 $ 110,358 $ 114,641

The accompanying notes are an integral part of these unaudited consolidated financial statements. 

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THE GEO GROUP, INC. 

CONSOLIDATED BALANCE SHEETS 

SEPTEMBER 30, 2018 AND DECEMBER 31, 2017 

(In thousands, except share data) 

September 30,

2018

December 31,

2017

(Unaudited)

ASSETS

Current Assets

Cash and cash equivalents $ 66,007 $ 81,377

Restricted cash and cash equivalents 54,931 44,932

Accounts receivable, less allowance for doubtful accounts of $4,261 and $4,574, respectively 403,610 389,916

Contract receivable, current portion 9,420 18,142

Prepaid expenses and other current assets 37,587 45,342

Total current assets 571,555 579,709

Restricted Cash and Investments 28,939 27,999

Property and Equipment, Net 2,148,005 2,078,123

Assets Held for Sale 2,634 3,915

Non-Current Contract Receivable 384,794 404,309

Deferred Income Tax Assets 26,277 26,277

Goodwill 776,368 778,951

Intangible Assets, Net 237,947 255,339

Other Non-Current Assets 65,820 72,286

Total Assets $ 4,242,339 $ 4,226,908

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities

Accounts payable $ 82,284 $ 92,587

Accrued payroll and related taxes 53,597 71,732

Accrued expenses and other current liabilities 197,459 176,324

Current portion of capital lease obligations, long-term debt and non-recourse debt 340,143 28,920

Total current liabilities 673,483 369,563

Non-Current Deferred Income Tax Liabilities 8,757 8,757

Other Non-Current Liabilities 89,214 96,702

Capital Lease Obligations 4,954 6,059

Long-Term Debt 2,363,318 2,181,544

Non-Recourse Debt 22,201 365,364

Commitments, Contingencies and Other (Note 13)

Shareholders’ Equity

Preferred stock, $0.01 par value, 30,000,000 shares authorized, none issued or outstanding — — 

Common stock, $0.01 par value, 187,500,000 shares authorized, 124,803,502 and 124,008,303 issued and 

121,686,019 and 124,008,303 outstanding, respectively 1,248 1,240

Additional paid-in capital 1,204,982 1,190,906

(Distributions) in excess of earnings/earnings in excess of distributions (29,018) 31,541

Accumulated other comprehensive loss (25,785) (24,446) 

Treasury stock, 3,117,483 and 0 shares, at cost, respectively (70,446) — 

Total shareholders’ equity attributable to The GEO Group, Inc. 1,080,981 1,199,241

Noncontrolling interests (569) (322) 

Total shareholders’ equity 1,080,412 1,198,919

Total Liabilities and Shareholders’ Equity $ 4,242,339 $ 4,226,908

The accompanying notes are an integral part of these unaudited consolidated financial statements. 

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THE GEO GROUP, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited) 

FOR THE NINE MONTHS ENDED 

SEPTEMBER 30, 2018 AND 2017 

(In thousands) 

Nine Months Ended

September 30,

2018

September 30,

2017

Cash Flow from Operating Activities:

Net income $ 111,474 $ 109,761

Net loss attributable to noncontrolling interests 223 123

Net income attributable to The GEO Group, Inc. 111,697 109,884

Adjustments to reconcile net income attributable to The GEO Group, Inc. to net cash provided by operating 

activities:

Depreciation and amortization expense 94,536 92,464

Stock-based compensation 16,351 14,852

Amortization of debt issuance costs, discount and/or premium and other non-cash interest 5,860 11,922

Provision for doubtful accounts 806 1,597

Equity in earnings of affiliates, net of tax (7,071) (4,255) 

Dividends received from unconsolidated joint venture 8,710 5,052

(Gain) loss on sale/disposal of property and equipment, net 3,652 2,194

Changes in assets and liabilities, net of effects of acquisitions:

Changes in accounts receivable, prepaid expenses and other assets (13,955) 5,604

Changes in contract receivable (3,412) (163,083) 

Changes in accounts payable, accrued expenses and other liabilities 3,049 (18,326) 

Net cash provided by operating activities 220,223 57,905

Cash Flow from Investing Activities:

Acquisition of CEC, net of cash acquired — (353,555) 

Insurance proceeds – damaged property 5,998 86

Proceeds from sale of property and equipment 2,061 856

Proceeds from sale of assets held for sale 3,797 — 

Change in restricted investments (2,413) (3,810) 

Capital expenditures (161,490) (104,130) 

Net cash used in investing activities (152,047) (460,553) 

Cash Flow from Financing Activities:

Proceeds from long-term debt 372,000 1,324,865

Payments on long-term debt (186,033) (1,093,088) 

Payments on non-recourse debt (9,636) (68,887) 

Proceeds from non-recourse debt — 123,785

Taxes paid related to net share settlements of equity awards (4,452) (4,122) 

Proceeds from issuance of common stock under prospectus supplement — 275,867

Proceeds from issuance of common stock in connection with ESPP 404 382

Payment for repurchases of common stock (70,446) — 

Debt issuance costs (990) (9,470) 

Proceeds from the exercise of stock options 1,781 6,786

Cash dividends paid (172,256) (169,152) 

Net cash (used in) provided by financing activities (69,628) 386,966

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash and Cash Equivalents (5,392) 863

Net Decrease in Cash, Cash Equivalents and Restricted Cash and Cash Equivalents (6,844) (14,819) 

Cash, Cash Equivalents and Restricted Cash and Cash Equivalents, beginning of period 133,545 90,357

Cash, Cash Equivalents and Restricted Cash and Cash Equivalents, end of period $ 126,701 $ 75,538

Supplemental Disclosures:

Non-cash Investing and Financing activities:

Capital expenditures in accounts payable and accrued expenses $ 4,152 $ 7,526

The accompanying notes are an integral part of these unaudited consolidated financial statements. 

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THE GEO GROUP, INC. 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 

1. BASIS OF PRESENTATION 

The GEO Group, Inc., a Florida corporation, and subsidiaries (the “Company” or “GEO”) is a fully-integrated real estate investment trust (“REIT”) 

specializing in the ownership, leasing and management of correctional, detention and reentry facilities and the provision of community-based services 

and youth services in the United States, Australia, South Africa and the United Kingdom. The Company owns, leases and operates a broad range of 

correctional and detention facilities including maximum, medium and minimum security prisons, immigration detention centers, minimum security 

detention centers, as well as community-based reentry facilities and offers an expanded delivery of offender rehabilitation services under its ‘GEO 

Continuum of Care’ platform. The ‘GEO Continuum of Care’ program integrates enhanced in-prison programs, which are evidence-based and include 

cognitive behavioral treatment and post-release services, and provides academic and vocational classes in life skills and treatment programs while 

helping individuals reintegrate into their communities. The Company develops new facilities based on contract awards, using its project development 

expertise and experience to design, construct and finance what it believes are state-of-the-art facilities that maximize security and efficiency. The 

Company provides innovative compliance technologies, industry-leading monitoring services, and evidence-based supervision and treatment programs 

for community-based parolees, probationers and pretrial defendants. The Company also provides secure transportation services for offender and 

detainee populations as contracted domestically and in the United Kingdom through its joint venture GEO Amey PECS Ltd. (“GEOAmey”). At 

September 30, 2018, the Company’s worldwide operations include the management and/or ownership of approximately 96,000 beds at 136 correctional 

and detention facilities, including idle facilities, projects under development and recently awarded contracts, and also include the provision of 

community supervision services for more than 192,000 offenders and pretrial defendants, including approximately 100,000 individuals through an array 

of technology products including radio frequency, GPS, and alcohol monitoring devices. 

The Company’s unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in accordance with 

accounting principles generally accepted in the United States and the instructions to Form 10-Q and consequently do not include all disclosures required 

by Form 10-K. The accounting policies followed for quarterly financial reporting are the same as those disclosed in the Notes to Consolidated Financial 

Statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2018 for the 

year ended December 31, 2017. The accompanying December 31, 2017 consolidated balance sheet has been derived from those audited financial 

statements. Additional information may be obtained by referring to the Company’s Form 10-K for the year ended December 31, 2017. In the opinion of 

management, all adjustments (consisting only of normal recurring items) necessary for a fair presentation of the financial information for the interim 

periods reported in this Quarterly Report on Form 10-Q have been made. Results of operations for the nine months ended September 30, 2018 are not 

necessarily indicative of the results for the entire year ending December 31, 2018, or for any other future interim or annual periods. 

2. REVENUE RECOGNITION 

On January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” using the 

modified retrospective method applied to those contracts that were not completed as of January 1, 2018. The adoption of this standard did not result in a 

significant change to the Company’s historical revenue recognition policies and there were no significant adjustments that required a cumulative 

adjustment to retained earnings upon transition. 

Revenue is recognized when control of the promised goods or services is transferred to GEO’s customers, in an amount that reflects the consideration 

GEO expects to be entitled to in exchange for those goods or services. Sales, value added and other taxes GEO collects concurrent with revenue 

producing activities and that are subsequently remitted to governmental authorities are excluded from revenues. The guidance distinguishes between 

goods and services. The definition of services under the guidance includes everything other than goods. As such, in the case of GEO, this guidance 

views the provision of housing as a service. 

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When a contract includes variable consideration, GEO determines an estimate of the variable consideration and evaluates whether the estimate needs to 

be constrained; therefore, GEO includes the variable consideration in the transaction price only to the extent that it is probable that a significant reversal 

of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. 

Variable consideration estimates are updated at each reporting date. A limited number of GEO’s domestic contracts have provisions upon which a small 

portion of the revenue for the contract is based on the performance of certain targets. Domestically, revenue based on the performance of certain targets 

is less than 1% of the Company’s consolidated domestic revenues and was not significant during the periods presented. One of GEO’s international 

contracts, related to its Ravenhall correctional facility project (discussed further below), contains a provision where a significant portion of the revenue 

for the contract is based on the performance of certain targets. These performance targets are based on specific criteria to be met over specific periods of 

time. Such criteria includes the Company’s ability to achieve certain contractual benchmarks relative to the quality of service it provides, 

non-occurrence of certain disruptive events, effectiveness of its quality control programs and its responsiveness to customer requirements. The 

performance of these targets are measured quarterly and there was no significant constraint on the estimate of such variable consideration for this 

contract during the nine months ended September 30, 2018. 

GEO does not disclose the value of unsatisfied performance obligations for (i) contracts with an expected length of one year or less and (ii) contracts for 

which revenue is recognized at the amount to which GEO has the right to invoice for services performed, which is generally the case for all of GEO’s 

contracts. Incidental items that are immaterial in the context of the contract are recognized as expense. GEO generally does not incur incremental costs 

of obtaining a contract with its customers that would meet the requirement for capitalization. There were no assets recognized from costs to obtain a 

contract with a customer at September 30, 2018 or December 31, 2017. 

The timing of revenue recognition may differ from the timing of invoicing to customers. GEO records a receivable when services are performed which 

are due from its customers based on the passage of time. GEO records a contract liability if consideration is received in advance of the performance of 

services. Generally, GEO’s customers do not provide payment in advance of the performance of services. Therefore, any contract liability is not 

significant at September 30, 2018 or December 31, 2017 and revenue recognized during the nine months ended September 30, 2018 that was included in 

the opening balance of unearned revenue was not significant. There have been no significant amounts of revenue recorded in the periods presented from 

performance obligations either wholly or partially satisfied in prior periods. 

The right to consideration under GEO’s contracts is only dependent on the passage of time and is therefore considered to be unconditional. Payment 

terms and conditions vary by contract type, although, with the exception of the contract receivable related to GEO’s Ravenhall correctional facility 

(further discussed below), terms generally include a requirement of payment within 30 days after performance obligations are satisfied and generally do 

not include a significant financing component. There have been no significant changes in receivable or unearned revenue balances during the period 

other than regular invoicing and collection activity. 

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The following table disaggregates GEO’s revenue by major source and also provides a reconciliation with revenue information disclosed for reportable 

segments in Note 14 – Business Segments and Geographic Information: 

Nine Months Ended September 30, 2018

(in thousands)

U.S.

Corrections &

Detention GEO Care International

Facility

Construction

and Design Total

Owned and Leased: Corrections & Detention $ 817,666 $ — $ — $ — $ 817,666

Owned and Leased: Community-based — 127,615 — — 127,615

Owned and Leased: Youth Services — 68,590 — — 68,590

Managed Only 289,350 3,724 193,121 — 486,195

Facility Construction and Design — — — — — 

Non-residential Services and Other — 231,890 — — 231,890

Total Revenues $1,107,016 $431,819 $ 193,121 $ — $1,731,956

Nine Months Ended September 30, 2017

(in thousands)

U.S.

Corrections &

Detention GEO Care International

Facility

Construction

and Design Total

Owned and Leased – Corrections & Detention $ 789,230 $ — $ — $ — $ 789,230

Owned and Leased – Community-based — 106,996 — — 106,996

Owned and Leased – Youth Services — 65,408 — — 65,408

Managed Only 284,610 2,278 130,261 — 417,149

Facility Construction and Design — — — 112,602 112,602

Non-residential Services and Other — 203,058 — — 203,058

Total Revenues $1,073,840 $377,740 $ 130,261 $ 112,602 $1,694,443

Owned and Leased – Corrections & Detention 

GEO recognizes revenue for corrections & detention housing services where GEO owns or leases the facility as services are performed. GEO provides 

for the safe and secure housing and care of incarcerated individuals under public-private partnerships with federal, state and local government agencies. 

This includes providing 24-hour care and supervision, including but not limited to, such services as medical, transportation, food service, laundry 

services and various programming activities. These tasks are considered to be activities to fulfill the safe and secure housing performance obligation and 

are not considered to be individually separate promises in the contract. Each of these activities is highly interrelated and GEO performs a significant 

level of integration of these activities. GEO has identified these activities as a bundle of services and determined that each day of the promised service is 

distinct. The services provided are part of a series of distinct services that are substantially the same and are measured using the same measure of 

progress (time-based output method). GEO has determined that revenue for these services are recognized over time as it’s customers simultaneously 

receive and consume the benefits as the services are performed, which is on a continual daily basis, and GEO has a right to payment for performance 

completed to date. Time-based output methods of revenue recognition are considered to be a faithful depiction of GEO’s efforts to fulfill its obligations 

under its contracts and therefore reflect the transfer of services to its customers. GEO’s customers generally pay for these services based on a net rate per 

day per individual or on a fixed monthly rate. 

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Owned and Leased – Community-based 

GEO recognizes revenue for community-based reentry services where GEO owns or leases the facility in a manner similar to its corrections and 

detention services discussed above. GEO provides individuals nearing the end of their sentence with the resources necessary to productively transition 

back into society. Through its residential reentry centers, GEO provides federal and state parolees and probationers with temporary housing, 

rehabilitation, substance abuse counseling and vocational and educational programs. These activities are considered to be a bundle of services which are 

a part of a series of distinct services recognized over time based on the same criteria as discussed above for corrections and detention revenues. GEO’s 

customers also generally pay for these services based on a net rate per day per individual or on a fixed monthly rate. 

Owned and Leased – Youth Services 

GEO recognizes revenues for youth services where GEO owns or leases the facility in the same manner as discussed above for the housing, supervision, 

care and rehabilitation of troubled youth residents. The activities to house and care for troubled youth residents are also considered to be a bundle of 

services which are part of a series of distinct services recognized over time based on the same criteria discussed for the previous two revenue streams. 

GEO’s customers generally pay for these services based on a net rate per day per individual. 

Managed Only 

GEO recognizes revenue for its managed only contracts in the same manner as its Owned and Leased Corrections & Detention and Owned and Leased 

Community-based contracts as discussed above. The primary exception is that GEO does not own or lease the facility. The facility is owned by the 

customer. In certain circumstances, GEO’s customers may request that GEO make certain capital improvements to the facility or make other payments 

related to the facility. These payments are amortized as a reduction of revenues over the life of the contract. GEO’s customers generally pay for these 

services based on a net rate per day per individual or a fixed monthly rate. 

Facility Construction and Design 

Facility Construction and Design revenues during the nine months ended September 30, 2017 consisted of one contract with the Department of Justice 

in the State of Victoria (the “State”) for the development and operation of a new 1,300-bed correctional facility (the “Facility”) in Ravenhall, a locality 

near Melbourne, Australia. The Facility was completed during the fourth quarter of 2017 and GEO is currently managing the Facility under a 25-year 

management contract. There were no facility construction and design revenues during the nine months ended September 30, 2018. GEO’s promise to 

design and construct the Facility was considered to be a separate and distinct performance obligation from the management obligation which includes 

the safe and secure housing, care and programming activities for incarcerated individuals similar to the correction & detention services discussed above. 

For the obligation to manage the Facility, GEO determined revenue should be recorded over time using a time-based output method based on the same 

criteria as discussed above for correction and detention services. Fees included and priced in the contract for managing the Facility are considered to be 

stated at their individual estimated stand-alone selling prices using the adjusted market assessment approach. These services are regularly provided by 

GEO on a stand-alone basis to similar customers within a similar range of amounts. GEO used the expected cost plus margin approach to allocate the 

transaction price to the construction obligation. GEO was entitled under the contract to receive consideration in the amount of its costs plus a margin. 

During the design and construction phase, GEO determined that revenue should be recorded over time and applied cost based input methods using the 

actual costs incurred relative to the total estimated costs (percentage of completion basis) to determine progress towards contract completion and to 

calculate the corresponding amount of revenue and gross profit to recognize. Cost 

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based input methods of revenue recognition are considered to be a faithful depiction of GEO’s efforts to satisfy long-term construction contracts and 

therefore reflect the transfer of goods to the customer as the customer controls the work in progress as the Facility is constructed. Cost based input 

methods of revenue recognition also require GEO to make estimates of net contract revenues and costs to complete the project. Significant judgment 

was required to evaluate the costs to complete the project, including materials, labor, contingencies and other costs. If estimated total costs on the 

contract are greater than the net contract revenues, the entire estimated loss on the contract is recognized in the period the loss becomes known. The 

cumulative effect of revisions to estimates related to net contract revenues or costs to complete are recorded in the period in which the revisions to 

estimates are identified and the amounts can be reasonably estimated. Typically, the Company enters into fixed price contracts and does not perform 

additional work unless approved change orders are in place. Costs attributable to unapproved change orders are expensed in the period in which the 

costs are incurred if the Company believes that it is not probable that the costs will be recovered through a change in the contract price. If the Company 

believes that it is probable that the costs will be recovered through a change in the contract price, costs related to unapproved change orders are 

expensed in the period in which they are incurred, and contract revenue is recognized to the extent of the costs incurred. Revenue in excess of the costs 

attributable to unapproved change orders is not recognized until the change order is approved. Changes in job performance, job conditions, and 

estimated profitability, including those arising from contract penalty provisions, and final contract settlements, may result in revisions to estimated costs 

and income, and are recognized in the period in which the revisions are determined. For the periods presented, there were no changes in job 

performance, job conditions and estimated profitability that required a revision to the estimated costs and income recorded. 

GEO was the primary developer of the project and subcontracted with a bonded international design and build contractor to design and construct the 

Facility. As the primary contractor for the project, GEO determined that it was primarily responsible for fulfilling the promise to develop and provide 

the Facility to the State, including overall responsibility for the acceptability of the project in meeting the State’s specifications. Therefore, GEO was 

considered to be a principal in the transaction and construction revenues and construction costs were recorded on a gross basis. 

The cost of the project during the design and construction phase was funded by debt financing along with a capital contribution by GEO which was 

made in January 2017. GEO’s promise to provide the equity contribution was considered to be a separate and distinct performance obligation that is 

separate from the construction and facility management obligations. The contribution represents a significant financing element which provided a 

benefit to the State. Costs incurred and estimated earnings in excess of billings are classified as contract receivable in the accompanying consolidated 

balance sheets. The contract receivable will be satisfied through a State contribution, which was made in November 2017 upon commercial acceptance 

of the Facility, and by quarterly payments to be made over the 25-year operating phase. The timing of these payments provide the State with a 

significant benefit of financing for the Facility as the payments by the State occur significantly after performance (construction of the Facility). 

Therefore, the contract receivable has been recorded at net present value based on the timing of expected future settlement. Interest income is calculated 

using an effective interest rate of 8.97% and has been presented separately from facility design and construction revenue. Interest income also includes 

an equity return for GEO’s capital contribution. 

Non-residential Services and Other 

Non-residential Services and Other revenue consists of the Company’s contracts with federal and various state and local governments to provide 

location, alcohol and drug detecting electronic monitoring and case management services to individuals on an as needed or as requested basis. This 

category also includes the Company’s day reporting centers. 

GEO recognizes revenues for electronic monitoring and case management services as the services are performed. Services provided consist of 

community-based supervision (home visits), in-person reporting, telephonic reporting and GPS and other electonic monitoring as well as overall 

contract management services. The rates for the various services are considered to be stated at their individual stand-alone selling prices. GEO has 

determined that the services to be provided are recognized over time based on the unit of occurrence of the various services as its customer 

simultaneously receives and consumes the benefits as the services are performed and GEO has a right to payment for performance completed to date. 

Generally, these services are paid based on a net rate per occurrence and a monthly fee for management services. 

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Certain of the Company’s electronic monitoring contracts include providing monitoring equipment and related monitoring services activities (using 

internal proprietary software platforms) to its customers. These tasks are considered to be activities to fulfill the promise to provide electronic 

monitoring services to individuals and are not considered to be individually separate promises in the contract. In the context of the contract, the 

equipment and monitoring service is not considered to be capable of being distinct as the customer typically cannot benefit from the equipment or 

monitoring service on its own or with other readily available resources. Management has identified these activities as a bundle of services and 

determined that each day or unit of the promised service is distinct. These services are part of a series of distinct services that are substantially the same 

and are measured using the same measure of progress (time-based output method) and are therefore accounted for as a single performance obligation. 

GEO has determined that services are recognized over time as the customer simultaneously receives and consumes the benefits as the services are 

performed and GEO has a right to payment for performance completed to date. 

Services provided for GEO’s day reporting centers are similar to its Owned and Leased Community-based services discussed above with the exception 

of temporary housing. 

3. BUSINESS COMBINATIONS 

Community Education Centers Acquisition 

On April 5, 2017, the Company completed its acquisition of Community Education Centers (“CEC”), pursuant to a definitive merger agreement entered 

into on February 12, 2017 between the Company, GEO/DE/MC/01 LLC, and CEC Parent Holdings LLC. Under the terms of the merger agreement, the 

Company acquired 100% of the voting interests in CEC for an aggregate consideration of $353.6 million. The Company does not believe that any of the 

goodwill recorded as a result of the CEC acquisition will be deductible for federal income tax purposes. 

The allocation of the purchase price was complete as of March 31, 2018. During the three months ended March 31, 2018, the Company made 

measurement period adjustments to provisional amounts with respect to the CEC acquisition that were recognized at the acquisition date to reflect new 

information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the 

amounts recognized as of that date. These adjustments related to the Company’s valuation of accounts payable and accrued expenses. Of the total 

measurement period adjustments, accounts payable and accrued expenses decreased by $1.0 million related to an accrual for a legal settlement that was 

funded out of cash held in escrow and by $1.4 million related to a contingency for unclaimed property. The remaining measurement period adjustments 

were not individually significant. The final purchase price allocation and adjustments made to the estimated acquisition date fair values during the three 

months ended March 31, 2018 are as follows (in thousands): 

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Acquisition

Date

Estimated

Fair Value as

of

December 31,

2017

Measurement

Period

Adjustments

Final

Acquisition

Date Fair

Value as of

March 31,

2018

Accounts Receivable $ 32,869 $ — $ 32,869

Prepaid and other current assets 4,397 — 4,397

Property and equipment 126,510 — 126,510

Intangible assets 76,000 — 76,000

Favorable lease assets 3,110 — 3,110

Deferred income tax assets 4,116 44 4,160

Other non-current assets 4,327 — 4,327

Total assets acquired $ 251,329 $ 44 $ 251,373

Accounts payable and accrued expenses 51,651 (1,339) 50,312

Unfavorable lease liabilities 1,299 — 1,299

Other non-current liabilities 10,479 (1,166) 9,313

Total liabilities assumed $ 63,429 $ (2,505) $ 60,924

Total identifiable net assets 187,900 2,549 190,449

Goodwill 165,656 (2,549) 163,107

Total consideration paid, net of cash acquired $ 353,556 $ — $ 353,556

The Company recognized a reduction of operating expenses of $2.3 million related to CEC during the nine months ended 

September 30, 2018 as a result of a recovery of funds held in escrow after the measurement period had ended. 

4. GOODWILL AND OTHER INTANGIBLE ASSETS 

The Company has recorded goodwill as a result of its various business combinations. On April 5, 2017, the Company completed its acquisition of CEC. 

Refer to Note 3 – Business Combinations. Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition 

and the fair value of the tangible assets and intangible assets acquired net of liabilities assumed, including noncontrolling interests. Changes in the 

Company’s goodwill balances from December 31, 2017 to September 30, 2018 are as follows (in thousands): 

December 31,

2017

Acquisition

Adjustments

Foreign

Currency

Translation

September 30,

2018

U.S. Corrections & Detention $ 317,005 $ (639) $ — $ 316,366

GEO Care 461,499 (1,910) — 459,589

International Services 447 — (34) 413

Total Goodwill $ 778,951 $ (2,549) $ (34) $ 776,368

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The Company has also recorded other finite and indefinite-lived intangible assets as a result of its various business combinations. Refer to Note 3 – 

Business Combinations for a discussion of the Company’s recent acquisition of CEC. The Company’s intangible assets include facility management 

contracts, covenants not to compete, trade names and technology, as follows (in thousands): 

September 30, 2018 December 31, 2017

Weighted

Average

Useful Life

(years)

Gross

Carrying

Amount

Accumulated

Amortization

Net

Carrying

Amount

Gross

Carrying

Amount

Accumulated

Amortization

Net

Carrying

Amount

Facility management contracts 16.3 $308,431 $ (122,309) $186,122 $308,518 $ (106,724) $201,794

Covenants not to compete 1 700 (700) — 700 (517) 183

Technology 7.3 33,700 (27,075) 6,625 33,700 (25,538) 8,162

Trade name (Indefinite lived) Indefinite 45,200 — 45,200 45,200 — 45,200

Total acquired intangible assets $388,031 $ (150,084) $237,947 $388,118 $ (132,779) $255,339

Amortization expense was $17.3 million and $18.1 million for the nine months ended September 30, 2018 and 2017, respectively. Amortization expense 

was primarily related to the U.S. Corrections & Detention and GEO Care segments’ amortization of acquired facility management contracts. As of 

September 30, 2018, the weighted average period before the next contract renewal or extension for the acquired facility management contracts was 

approximately 1.5 years. Although the facility management contracts acquired have renewal and extension terms in the near term, the Company has 

historically maintained these relationships beyond the current contractual periods. 

Estimated amortization expense related to the Company’s finite-lived intangible assets for the remainder of 2018 through 2022 and thereafter is as 

follows (in thousands): 

Fiscal Year

Total

Amortization

Expense

Remainder of 2018 $ 5,647

2019 22,305

2020 22,305

2021 19,782

2022 18,103

Thereafter 104,605

$ 192,747

5. FINANCIAL INSTRUMENTS 

The following tables provide a summary of the Company’s significant financial assets and liabilities carried at fair value and measured on a recurring 

basis as of September 30, 2018 and December 31, 2017 (in thousands): 

Fair Value Measurements at

September 30, 2018

Carrying

Value at

September 30,

2018

Quoted Prices in

Active Markets

(Level 1)

Significant Other

Observable

Inputs

(Level 2)

Significant

Unobservable

Inputs (Level 3)

Assets:

Restricted investment:

Rabbi Trust $ 23,176 $ — $ 23,176 $ — 

Fixed income securities 1,871 — 1,871 — 

Liabilities:

Interest rate swap derivatives $ 8,638 $ — $ 8,638 $ — 

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Fair Value Measurements at

December 31, 2017

Carrying

Value at

December 31,

2017

Quoted Prices in

Active Markets

(Level 1)

Significant Other

Observable Inputs

(Level 2)

Significant

Unobservable

Inputs (Level 3)

Assets:

Restricted investments:

Rabbi Trust $ 20,763 $ — $ 20,763 $ — 

Fixed income securities 1,902 — 1,902 — 

Liabilities:

Interest rate swap derivatives $ 13,992 $ — $ 13,992 $ — 

The Company’s Level 2 financial instruments included in the tables above as of September 30, 2018 and December 31, 2017 consist of interest rate 

swap derivative liabilities held by the Company’s Australian subsidiary, the Company’s rabbi trust established for GEO employee and employer 

contributions to The GEO Group, Inc. Non-qualified Deferred Compensation Plan and an investment in Canadian dollar denominated fixed income 

securities. 

The Australian subsidiary’s interest rate swap derivative liabilities are valued using a discounted cash flow model based on projected Australian 

borrowing rates. The Company’s restricted investment in the rabbi trust is invested in Company owned life insurance policies which are recorded at 

their cash surrender values. These investments are valued based on the underlying investments held in the policies’ separate account. The underlying 

assets are equity and fixed income pooled funds that are comprised of Level 1 and Level 2 securities. The Canadian dollar denominated securities, not 

actively traded, are valued using quoted rates for these and similar securities. 

During the nine months ended September 30, 2018, the Company transferred certain accounts receivable balances that had a carrying value of 

approximately $6.9 million to an unrelated third party. The transfer was accounted for as a sale and the Company has no continuing involvement with 

the transferred assets. The Company received cash proceeds in connection with the sale of approximately $6.9 million, and as such, there was no gain or 

loss in connection with the transaction. 

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6. FAIR VALUE OF ASSETS AND LIABILITIES 

The Company’s consolidated balance sheets reflect certain financial assets and liabilities at carrying value. The carrying value of certain debt 

instruments, if applicable, is net of unamortized discount. The following tables present the carrying values of those financial instruments and the 

estimated corresponding fair values at September 30, 2018 and December 31, 2017 (in thousands): 

Estimated Fair Value Measurements at

September 30, 2018

Carrying

Value as of

September 30,

2018

Total Fair

Value Level 1 Level 2 Level 3

Assets:

Cash and cash equivalents $ 66,007 $ 66,007 $66,007 $ — $ — 

Restricted cash and investments 60,694 60,694 58,241 2,453 — 

Liabilities:

Borrowings under senior credit facility $ 1,243,919 $1,242,560 $ — $1,242,560 $ — 

5.875% Senior Notes due 2024 250,000 240,523 — 240,523 — 

5.125% Senior Notes 300,000 289,731 — 289,731 — 

5.875% Senior Notes due 2022 250,000 252,878 — 252,878 — 

6.00% Senior Notes 350,000 336,872 — 336,872 — 

Non-recourse debt 357,506 357,736 — 357,736 — 

Estimated Fair Value Measurements at

December 31, 2017

Carrying

Value as of

December 31,

2017

Total Fair

Value Level 1 Level 2 Level 3

Assets:

Cash and cash equivalents $ 81,377 $ 81,377 $81,377 $ — $ — 

Restricted cash and investments 52,168 52,168 49,884 2,284 — 

Liabilities:

Borrowings under senior credit facility $ 1,064,599 $1,070,514 $ — $1,070,514 $ — 

5.875% Senior Notes due 2024 250,000 262,095 — 262,095 — 

5.125% Senior Notes 300,000 303,918 — 303,918 — 

5.875% Senior Notes due 2022 250,000 258,338 — 258,338 — 

6.00% Senior Notes 350,000 362,835 — 362,835 — 

Non-recourse debt 393,737 394,671 — 394,671 — 

The fair values of the Company’s cash and cash equivalents, and restricted cash approximates the carrying values of these assets at September 30, 2018 

and December 31, 2017. Restricted cash consists of money market funds, bank deposits, commercial paper and time deposits used for asset replacement 

funds and other funds contractually required to be maintained at the Company’s Australian subsidiary. The fair value of the money market funds and 

bank deposits is based on quoted market prices (Level 1) and the fair value of commercial paper and time deposits is based on market prices for similar 

instruments (Level 2). 

The fair values of the Company’s 5.875% senior unsecured notes due 2022 (“5.875% Senior Notes due 2022”), 5.875% senior unsecured notes due 

2024 (“5.875% Senior Notes due 2024”), 6.00% senior unsecured notes due 2026 (“6.00% Senior Notes”), and the 5.125% senior unsecured notes due 

2023 (“5.125% Senior Notes”), although not actively traded, are based on published financial data for these instruments. The fair values of the 

Company’s non-recourse debt related to the Washington Economic Development Finance Authority (“WEDFA”) and the Company’s Australian 

subsidiary are estimated based on market prices of similar instruments. The fair value of borrowings under the senior credit facility is based on an 

estimate of trading value considering the Company’s borrowing rate, the undrawn spread and similar instruments. 

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7. RESTRICTED CASH AND CASH EQUIVALENTS 

The following table provides a reconciliation of cash, cash equivalents and restricted cash and cash equivalents reported on the consolidated balance 

sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows: 

September 30,

2018

September 30,

2017

Cash and Cash Equivalents $ 66,007 $ 51,526

Restricted cash and cash equivalents – current 54,931 12,452

Restricted cash and investments – non-current 28,939 31,032

Less Restricted investments – non-current (23,176) (19,472) 

Total cash, cash equivalents and restricted cash and cash equivalents 

shown in the statement of cash flows $ 126,701 $ 75,538

Amounts included in restricted cash and cash equivalents are attributable to certain contractual cash restriction requirements at the Company’s wholly 

owned Australian subsidiary related to non-recourse debt and asset replacement funds contractually required to be maintained and other guarantees. 

Restricted investments – non-current (included in Restricted Cash and Investments in the accompanying consolidated balance sheets) consists of the 

Company’s rabbi trust established for employee and employer contributions to The GEO Group, Inc. Non-qualified Deferred Compensation Plan and is 

not considered to be a restricted cash equivalent. Refer to Note 5 – Financial Instruments. 

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8. SHAREHOLDERS’ EQUITY 

The following table presents the changes in shareholders’ equity that are attributable to the Company’s shareholders and to noncontrolling interests (in 

thousands): 

Common shares Additional

Paid-In

Capital

Earnings in

Excess of

Distributions/

(Distributions)

in Excess of

Earnings

Accumulated

Other

Comprehensive

Loss

Treasury shares

Noncontrolling

Interests

Total

Shareholders’

Shares Amount Shares Amount Equity

Balance, January 1, 2018 124,008 $1,240 $1,190,906 $ 31,541 $ (24,446) — $ — $ (322) $ 1,198,919

Proceeds from exercise of stock options 97 1 1,780 — — — — — 1,781

Stock-based compensation expense — — 16,351 — — — — — 16,351

Restricted stock granted 905 9 (9) — — — — — 

Restricted stock canceled (52) — — — — — — — — 

Dividends paid — — — (172,256) — — — — (172,256) 

Shares withheld for net settlements of sharebased awards [1] (173) (2) (4,450) — — — — — (4,452) 

Issuance of common stock – ESPP 18 — 404 — — — — — 404

Repurchases of common stock (3,117) — — — — 3,117 (70,446) — (70,446) 

Net income (loss) — — — 111,697 — — — (223) 111,474

Other comprehensive loss — — — — (1,339) — — (24) (1,363) 

Balance, September 30, 2018 121,686 $1,248 $1,204,982 $ (29,018) $ (25,785) 3,117 $(70,446) $ (569) $ 1,080,412

[1] During the nine months ended September 30, 2018, the Company withheld shares through net share settlements to satisfy statutory tax 

withholding requirements upon vesting of shares of restricted stock held by employees. 

REIT Distributions 

As a REIT, GEO is required to distribute annually at least 90% of its REIT taxable income (determined without regard to the dividends paid deduction 

and by excluding net capital gain) and began paying regular quarterly REIT dividends in 2013. The amount, timing and frequency of future dividends, 

however, will be at the sole discretion of GEO’s Board of Directors (the “Board”) and will be declared based upon various factors, many of which are 

beyond GEO’s control, including, GEO’s financial condition and operating cash flows, the amount required to maintain REIT status, limitations on 

distributions in GEO’s existing and future debt instruments, limitations on GEO’s ability to fund distributions using cash generated through GEO’s 

taxable REIT subsidiaries (“TRSs”) and other factors that GEO’s Board may deem relevant. 

During the nine months ended September 30, 2018 and the year ended December 31, 2017 GEO declared and paid the following regular cash 

distributions to its shareholders as follows: 

Declaration Date Record Date Payment Date

Distribution

Per Share

Aggregate

Payment

Amount

(in millions)

February 6, 2017 February 17, 2017 February 27, 2017 $ 0.47 $ 52.5

April 25, 2017 May 9, 2017 May 19, 2017 $ 0.47 $ 58.4

July 10, 2017 July 21, 2017 July 28, 2017 $ 0.47 $ 58.3

October 12, 2017 October 23, 2017 October 30, 2017 $ 0.47 $ 58.3

February 5, 2018 February 16, 2018 February 27, 2018 $ 0.47 $ 58.3

April 11, 2018 April 23, 2018 May 3, 2018 $ 0.47 $ 57.4

July 10, 2018 July 20, 2018 July 27, 2018 $ 0.47 $ 57.2

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Stock Buyback Program 

On February14, 2018, the Company announced that its Board of Directors authorized a stock buyback program authorizing the Company to repurchase 

up to a maximum of $200.0 million of its shares of common stock. The stock buyback program will be funded primarily with cash on hand, free cash 

flow and borrowings under the Company’s $900 million revolving credit facility (the “Revolver”). The program is effective through October 20, 2020. 

The stock buyback program is intended to be implemented through purchases made from time to time in the open market or in privately negotiated 

transactions, in accordance with applicable Securities and Exchange Commission (“SEC”) requirements. The stock buyback program does not obligate 

the Company to purchase any specific amount of our common stock and may be suspended or extended at any time at the discretion of the Company’s 

Board of Directors. During the nine months ended September 30, 2018, the Company purchased 3,117,483 shares of its common stock at a cost of 

$70.4 million primarily purchased with proceeds from the Company’s Revolver. The Company believes it has the ability to continue to fund the stock 

buyback program, its debt service requirements and its maintenance and growth capital expenditure requirements, while maintaining sufficient liquidity 

for other corporate purposes. 

Prospectus Supplement 

On October 20, 2017, the Company filed with the SEC an automatic shelf registration on Form S-3. Under this shelf registration, the Company may, 

from time to time, sell any combination of securities described in the prospectus in one or more offerings. Each time that the Company may sell 

securities, the Company will provide a prospectus supplement that will contain specific information about the terms of that offering and the securities 

being offered. On November 9, 2017, in connection with the shelf registration, the Company filed with the SEC a prospectus supplement related to the 

offer and sale from time to time of the Company’s common stock at an aggregate offering price of up to $150 million through sales agents. Sales of 

shares of the Company’s common stock under the prospectus supplement and the equity distribution agreements entered into with the sales agents, if 

any, may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities 

Act of 1933. There were no shares of common stock sold under this prospectus supplement during the nine months ended September 30, 2018. 

Comprehensive Income (Loss) 

Comprehensive income (loss) represents the change in shareholders’ equity from transactions and other events and circumstances arising from 

non-shareholder sources. The Company’s total comprehensive income (loss) is comprised of net income attributable to GEO, net income attributable to 

noncontrolling interests, foreign currency translation adjustments that arise from consolidating foreign operations that do not impact cash flows, net 

unrealized gains and/or losses on derivative instruments, and pension liability adjustments within shareholders’ equity and comprehensive income (loss). 

The components of accumulated other comprehensive income (loss) attributable to GEO within shareholders’ equity are as follows: 

Nine Months Ended September 30, 2018

(In thousands)

Foreign currency

translation adjustments,

net of tax attributable to

The GEO Group, Inc. (1)

Change in fair value of

derivatives, net of tax

Pension

adjustments,

net of tax Total

Balance, January 1, 2018 $ (7,470) $ (11,892) $ (5,084) $(24,446) 

Current-period other comprehensive (loss) income (5,858) 4,550 (31) (1,339) 

Balance, September 30, 2018 $ (13,328) $ (7,342) $ (5,115) $(25,785) 

(1) The foreign currency translation related to noncontrolling interests was not significant at September 30, 2018 or December 31, 2017. 

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9. EQUITY INCENTIVE PLANS 

The Board has adopted The GEO Group, Inc. 2018 Stock Incentive Plan (the “2018 Plan”), which was approved by the Company’s shareholders on 

April 24, 2018. The 2018 Plan replaced the 2014 Stock Incentive Plan (the “2014 Plan”). As of the date the 2018 Plan was adopted, it provided for a 

reserve of 4,600,000 shares of common stock that may be issued pursuant to awards granted under the 2018 Plan. The Company filed a Form S-8 

registration statement related to the 2018 Plan on May 11, 2018. 

Stock Options 

The Company uses a Black-Scholes option valuation model to estimate the fair value of each time based or performance based option awarded. For 

options granted during the nine months ended September 30, 2018, the fair value was estimated using the following assumptions: (i) volatility of 

39.69%; (ii) expected term of 5.0 years; (iii) risk free interest rate of 2.84%; and (iv) expected dividend yield of 8.70%. A summary of the activity of 

stock option awards issued and outstanding under Company plans was as follows for the nine months ended September 30, 2018: 

Shares

Wtd. Avg.

Exercise

Price

Wtd. Avg.

Remaining

Contractual Term

(years)

Aggregate

Intrinsic

Value

(in thousands) (in thousands)

Options outstanding at January 1, 2018 1,230 $ 25.02 7.33 $ 3,117

Options granted 475 21.60

Options exercised (97) 19.13

Options forfeited/canceled/expired (108) 25.24

Options outstanding at September 30, 2018 1,500 $ 24.30 7.50 $ 4,849

Options vested and expected to vest at September 30, 

2018 1,404 $ 24.31 7.39 $ 4,580

Options exercisable at September 30, 2018 656 $ 23.80 5.93 $ 2,601

On April 24, 2018, the Company granted approximately 475,000 options to certain employees which had a grant date fair value of $3.64. For the nine 

months ended September 30, 2018 and September 30, 2017, the amount of stock-based compensation expense related to stock options was $0.7 million 

and $1.1 million, respectively. As of September 30, 2018, the Company had $2.4 million of unrecognized compensation costs related to non-vested 

stock option awards that are expected to be recognized over a weighted average period of 3.0 years. 

Restricted Stock 

Compensation expense for nonvested stock awards is recorded over the vesting period based on the fair value at the date of grant. Generally, the 

restricted stock awards vest in equal increments over either a three or four-year period. The fair value of restricted stock awards, which do not contain a 

market-based vesting condition, is determined using the closing price of the Company’s common stock on the date of grant. The Company has 

historically issued share-based awards with service-based, performance-based and market-based vesting criteria. 

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A summary of the activity of restricted stock outstanding is as follows for the nine months ended September 30, 2018: 

Shares

Wtd. Avg.

Grant Date

Fair Value

(in thousands)

Restricted stock outstanding at January 1, 2018 1,770 $ 30.47

Granted 905 22.70

Vested (577) 28.52

Forfeited/canceled (52) 25.00

Restricted stock outstanding at September 30, 2018 2,046 $ 27.54

During the nine months ended September 30, 2018, the Company granted approximately 905,000 shares of restricted stock to certain employees and 

executive officers. Of these awards, 352,500 are market and performance-based awards which will be forfeited if the Company does not achieve certain 

annual metrics during 2018, 2019 and 2020. 

The vesting of these performance-based restricted stock grants are subject to the achievement by GEO of two annual performance metrics as follows: 

(i) up to 50% of the shares of restricted stock (“TSR Target Award”) can vest at the end of a three year performance period if GEO meets certain total 

shareholder return (“TSR”) performance targets, as compared to the total shareholder return of a peer group of companies, over a three year period from 

January 1, 2018 to December 31, 2020 and (ii) up to 50% of the shares of restricted stock (“ROCE Target Award”) can vest at the end of a three year 

period if GEO meets certain return on capital employed (“ROCE”) performance targets over a three year period from January 1, 2018 to December 31, 

2020. These market and performance awards can vest at between 0% and 200% of the target awards for both metrics. The number of shares shown for 

the performance-based awards is based on the target awards for both metrics. 

The metric related to ROCE is considered to be a performance condition. For share-based awards that contain a performance condition, the achievement 

of the targets must be probable before any share-based compensation expense is recorded. The Company reviews the likelihood of which the target in 

the range will be achieved and if deemed probable, compensation expense is recorded at that time. If subsequent to initial measurement there is a change 

in the estimate of the probability of meeting the performance condition, the effect of the change in the estimated quantity of awards expected to vest is 

recognized by cumulatively adjusting compensation expense. If ultimately the performance targets are not met, for any awards where vesting was 

previously deemed probable, previously recognized compensation expense will be reversed in the period in which vesting is no longer deemed probable. 

The fair value of these awards was determined based on the closing price of the Company’s common stock on the date of grant. 

The metric related to TSR is considered to be a market condition. For share-based awards that contain a market condition, the probability of satisfying 

the market condition must be considered in the estimate of grant-date fair value and previously recorded compensation expense is not reversed if the 

market condition is never met. The fair value of these awards was determined based on a Monte Carlo simulation, which calculates a range of possible 

outcomes and the probabilities that they will occur, using the following key assumptions: (i) volatility of 44.5%; (ii) beta of 1.05; and (iii) risk free rate 

of 2.58%. 

For the nine months ended September 30, 2018 and September 30, 2017, the Company recognized $15.6 million and $13.8 million, respectively, of 

compensation expense related to its restricted stock awards. As of September 30, 2018, the Company had $40.0 million of unrecognized compensation 

costs related to non-vested restricted stock awards, including non-vested restricted stock awards with performance-based and market-based vesting, that 

are expected to be recognized over a weighted average period of 2.4 years. 

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Employee Stock Purchase Plan 

The Company previously adopted The GEO Group Inc. 2011 Employee Stock Purchase Plan (the “Plan or “ESPP”) which was approved by the 

Company’s shareholders. The purpose of the Plan, which is qualified under Section 423 of the Internal Revenue Service Code of 1986, as amended, is to 

encourage stock ownership through payroll deductions by the employees of GEO and designated subsidiaries of GEO in order to increase their 

identification with the Company’s goals and secure a proprietary interest in the Company’s success. These deductions are used to purchase shares of the 

Company’s common stock at a 5% discount from the then current market price. The Company has made available up to 750,000 shares of its common 

stock, which were registered with the Securities and Exchange Commission on May 4, 2012, as amended on July 18, 2014, for sale to eligible 

employees under the Plan. 

The Plan is considered to be non-compensatory. As such, there is no compensation expense required to be recognized. Share purchases under the Plan 

are made on the last day of each month. During the nine months ended September 30, 2018, 17,751 shares of the Company’s common stock were issued 

in connection with the Plan. 

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10. EARNINGS PER SHARE 

Basic earnings per share of common stock is computed by dividing the net income attributable to The GEO Group, Inc. by the weighted average number 

of outstanding shares of common stock. The calculation of diluted earnings per share is similar to that of basic earnings per share except that the 

denominator includes dilutive common stock equivalents such as stock options and shares of restricted stock. Basic and diluted earnings per share were 

calculated for the three and nine months ended September 30, 2018 and 2017 as follows (in thousands, except per share data): 

Three Months Ended Nine Months Ended

September 30,

2018

September 30,

2017

September 30,

2018

September 30,

2017

Net income $ 39,229 $ 38,453 $ 111,474 $ 109,761

Net loss attributable to noncontrolling interests 60 36 223 123

Net income attributable to The GEO Group, Inc. 39,289 38,489 111,697 109,884

Basic earnings per share attributable to The GEO Group, 

Inc.:

Weighted average shares outstanding 119,681 122,251 120,567 119,356

Per share amount $ 0.33 $ 0.31 $ 0.93 $ 0.92

Diluted earnings per share attributable to The GEO Group, 

Inc.:

Weighted average shares outstanding 119,681 122,251 120,567 119,356

Dilutive effect of equity incentive plans 621 636 488 758

Weighted average shares assuming dilution 120,302 122,887 121,055 120,114

Per share amount $ 0.33 $ 0.31 $ 0.92 $ 0.91

Three Months 

For the three months ended September 30, 2018, 613,224 weighted average shares of common stock underlying options were excluded from the 

computation of diluted earnings per share (“EPS”) because the effect would be anti-dilutive. There were 477,941 common stock equivalents from 

restricted shares that were anti-dilutive. 

For the three months ended September 30, 2017, 681,007 weighted average shares of common stock underlying options were excluded from the 

computation of diluted EPS because the effect would be anti-dilutive. There were 818,400 common stock equivalents from restricted shares that were 

anti-dilutive. 

Nine Months 

For the nine months ended September 30, 2018, 904,375 weighted average shares of common stock underlying options were excluded from the 

computation of diluted EPS because the effect would be anti-dilutive. There were 671,149 common stock equivalents from restricted shares that were 

anti-dilutive. 

For the nine months ended September 30, 2017, 601,453 weighted average shares of common stock underlying options were excluded from the 

computation of diluted EPS because the effect would be anti-dilutive. There were 662,126 common stock equivalents from restricted shares that were 

anti-dilutive. 

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11. DERIVATIVE FINANCIAL INSTRUMENTS 

The Company’s primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in interest rates. 

The Company measures its derivative financial instruments at fair value. 

Australia – Ravenhall 

The Company’s Australian subsidiary has entered into interest rate swap agreements to fix the interest rate on its variable rate non-recourse debt related 

to a correctional facility project in Ravenhall, a locality near Melbourne, Australia to 4.2% during the project’s operating phase. The swaps’ notional 

amounts coincide with outstanding draws under the project. At September 30, 2018, the swaps had a notional amount of approximately AUD 

457 million, or $330.2 million, based on exchange rates at September 30, 2018. The Company has determined that the swaps have payment, expiration 

dates, and provisions that coincide with the terms of the non-recourse debt and are therefore considered to be effective cash flow hedges. Accordingly, 

the Company records the change in the fair value of the interest rate swaps in accumulated other comprehensive income, net of applicable income taxes. 

Total unrealized gain recorded in other comprehensive income, net of tax, related to this cash flow hedge was $4.6 million during the nine months ended 

September 30, 2018. The total fair value of the swap liability as of September 30, 2018 was $8.6 million and is recorded as a component of Other 

Non-Current liabilities within the accompanying consolidated balance sheet. There was no material ineffectiveness for the periods presented. The 

Company does not expect to enter into any transactions during the next twelve months which would result in the reclassification into earnings or losses 

associated with these swaps currently reported in accumulated other comprehensive income (loss). 

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12. DEBT 

Debt outstanding as of September 30, 2018 and December 31, 2017 consisted of the following (in thousands): 

September 30,

2018

December 31,

2017

Senior Credit Facility:

Term loan $ 788,000 $ 794,000

Unamortized discount on term loan (7,192) (3,499) 

Unamortized debt issuance costs on term loan (3,032) (7,612) 

Revolver 455,919 270,559

Total Senior Credit Facility 1,233,695 1,053,448

6.00% Senior Notes:

Notes Due in 2026 350,000 350,000

Unamortized debt issuance costs (4,950) (5,325) 

Total 6.00% Senior Notes Due in 2026 345,050 344,675

5.875% Senior Notes:

Notes Due in 2024 250,000 250,000

Unamortized debt issuance costs (3,078) (3,385) 

Total 5.875% Senior Notes Due in 2024 246,922 246,615

5.125% Senior Notes:

Notes Due in 2023 300,000 300,000

Unamortized debt issuance costs (3,712) (4,184) 

Total 5.125% Senior Notes Due in 2023 296,288 295,816

5.875% Senior Notes:

Notes Due in 2022 250,000 250,000

Unamortized debt issuance costs (2,702) (3,241) 

Total 5.875% Senior Notes Due in 2022 247,298 246,759

Non-Recourse Debt 357,692 394,008

Unamortized debt issuance costs on non-recourse debt (5,159) (9,322) 

Unamortized discount on non-recourse debt (186) (271) 

Total Non-Recourse Debt 352,347 384,415

Capital Lease Obligations 6,412 7,431

Other debt 2,604 2,728

Total debt 2,730,616 2,581,887

Current portion of capital lease obligations, long-term debt and non-recourse debt (340,143) (28,920) 

Capital Lease Obligations, long-term portion (4,954) (6,059) 

Non-Recourse Debt, long-term portion (22,201) (365,364) 

Long-Term Debt $ 2,363,318 $ 2,181,544

Amended and Restated Credit Agreement 

On April 30, 2018, GEO entered into Amendment No. 1 to Third Amended and Restated Credit Agreement (the “Credit Agreement”) by and among the 

Refinancing Lenders party thereto, the other lenders party thereto, GEO and GEO Corrections Holdings, Inc. and BNP Paribas, as Administrative 

Agent. The amendment, among other things, provides for the refinancing of all of GEO’s existing senior secured term loans with refinancing term loans 

in the aggregate principal amount of $792.0 million and makes certain other modifications to GEO’s senior secured credit agreement. The interest rate 

applicable to the refinancing term loans is equal to LIBOR plus 2.00% (with a LIBOR floor of 0.75%). The amendment was considered to be a 

modification and loan costs of approximately $1.0 million were incurred and capitalized in connection with the transaction. 

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The Credit Agreement evidences a credit facility (the “Credit Facility”) consisting of the $792.0 million term loan discussed above (the “Term Loan”) 

bearing interest at LIBOR plus 2.00% (with a LIBOR floor of 0.75%), and a $900.0 million Revolver initially bearing interest at LIBOR plus 2.25% 

(with no LIBOR floor) together with AUD275 million available solely for the issuance of financial letters of credit and performance letters of credit, in 

each case denominated in Australian Dollars under the Australian Dollar Letter of Credit Facility (the “Australian LC Facility”). As of September 30, 

2018, there were no letters of credit issued under the Australian LC Facility. Amounts to be borrowed by GEO under the Credit Agreement are subject 

to the satisfaction of customary conditions to borrowing. The Term Loan component is scheduled to mature on March 23, 2024. The revolving credit 

commitment component is scheduled to mature on May 19, 2021. The Credit Agreement also has an accordion feature of $450.0 million, subject to 

lender demand and prevailing market conditions and satisfying the relevant borrowing conditions. 

The Credit Agreement contains certain customary representations and warranties, and certain customary covenants that restrict GEO’s ability to, among 

other things (i) create, incur or assume any indebtedness, (ii) create, incur, assume or permit liens, (iii) make loans and investments, (iv) engage in 

mergers, acquisitions and asset sales, (v) make certain restricted payments, (vi) issue, sell or otherwise dispose of capital stock, (vii) engage in 

transactions with affiliates, (viii) allow the total leverage ratio to exceed 6.25 to 1.00, allow the senior secured leverage ratio to exceed 3.50 to 1.00, or 

allow the interest coverage ratio to be less than 3.00 to 1.00, (ix) cancel, forgive, make any voluntary or optional payment or prepayment on, or redeem 

or acquire for value any senior notes, except as permitted, (x) alter the business GEO conducts, and (xi) materially impair GEO’s lenders’ security 

interests in the collateral for its loans. 

Events of default under the Credit Agreement include, but are not limited to, (i) GEO’s failure to pay principal or interest when due, (ii) GEO’s material 

breach of any representation or warranty, (iii) covenant defaults, (iv) liquidation, reorganization or other relief relating to bankruptcy or insolvency, 

(v) cross default under certain other material indebtedness, (vi) unsatisfied final judgments over a specified threshold, (vii) certain material 

environmental liability claims asserted against GEO, and (viii) a change in control. 

All of the obligations under the Credit Agreement are unconditionally guaranteed by certain domestic subsidiaries of GEO and the Credit Agreement 

and the related guarantees are secured by a perfected first-priority pledge of substantially all of GEO’s present and future tangible and intangible 

domestic assets and all present and future tangible and intangible domestic assets of each guarantor, including but not limited to a first-priority pledge of 

all of the outstanding capital stock owned by GEO and each guarantor in their domestic subsidiaries. 

GEO Australasia Holdings Pty Ltd, GEO Australasia Finance Holdings Pty Ltd as trustee for the GEO Australasia Finance Holding Trust, and together 

with GEO Australasia Holdings, collectively (“the Australian Borrowers”) are wholly owned foreign subsidiaries of GEO. GEO has designated each of 

the Australian Borrowers as restricted subsidiaries under the Credit Agreement. However, the Australian Borrowers are not obligated to pay or perform 

any obligations under the Credit Agreement other than their own obligations as Australian Borrowers under the Credit Agreement. The Australian 

Borrowers do not pledge any of their assets to secure any obligations under the Credit Agreement. 

On August 18, 2016, the Company executed a Letter of Offer by and among GEO and HSBC Bank Australia Limited (the “Letter of Offer”) providing 

for a bank guarantee line and bank guarantee/standby sub-facility in an aggregate amount of approximately AUD100 million, or $72.2 million, based on 

exchange rates in effect as of September 30, 2018 (collectively, the “Bank Guarantee Facility”). The Bank Guarantee Facility allows GEO to provide 

letters of credit to assure performance of certain obligations of its wholly owned subsidiary relating to its correctional facility in Ravenhall, located near 

Melbourne, Australia. The Bank Guarantee Facility is unsecured. The issuance of letters of credit under the Bank Guarantee Facility is subject to the 

satisfaction of the conditions precedent specified in the Letter of Offer. Letters of credit issued under the bank guarantee lines are due on demand and 

letters of credit issued under the bank guarantee/standby sub-facility cannot have a duration exceeding twelve months. The Bank Guarantee Facility may 

be terminated by HSBC Bank Australia Limited on 90 days written notice. As of September 30, 2018, there was AUD100 million in letters of credit 

issued under the Bank Guarantee Facility. 

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As of September 30, 2018, the Company had approximately $788 million in aggregate borrowings outstanding under the Term Loan, approximately 

$456 million in borrowings under the Revolver, and approximately $70 million in letters of credit which left approximately $374 million in additional 

borrowing capacity under the Revolver. The weighted average interest rate on outstanding borrowings under the Credit Agreement as of September 30, 

2018 was 4.3%. 

6.00% Senior Notes due 2026 

Interest on the 6.00% Senior Notes accrues at the stated rate. The Company pays interest semi-annually in arrears on April 15 and October 15 of each 

year. On or after April 15, 2019, the Company may, at its option, redeem all or part of the 6.00% Senior Notes at the redemption prices set forth in the 

indenture governing the 6.00% Senior Notes. The indenture contains certain covenants, including limitations and restrictions on the Company and its 

subsidiary guarantors. Refer to Note 17- Condensed Consolidating Financial Information. 

5.875% Senior Notes due 2024 

Interest on the 5.875% Senior Notes due 2024 accrues at the stated rate. The Company pays interest semi-annually in arrears on April 15 and October 15 

of each year. On or after October 15, 2019, the Company may, at its option, redeem all or part of the 5.875% Senior Notes due 2024 at the redemption 

prices set forth in the indenture governing the 5.875% Senior Notes due 2024. The indenture contains certain covenants, including limitations and 

restrictions on the Company and its subsidiary guarantors. Refer to Note 17- Condensed Consolidating Financial Information. 

5.125% Senior Notes due 2023 

Interest on the 5.125% Senior Notes accrues at the stated rate. The Company pays interest semi-annually in arrears on April 1 and October 1 of each 

year. On or after April 1, 2018, the Company may, at its option, redeem all or part of the 5.125% Senior Notes at the redemption prices set forth in the 

indenture governing the 5.125% Senior Notes. The indenture contains certain covenants, including limitations and restrictions on the Company and its 

subsidiary guarantors. Refer to Note 17- Condensed Consolidating Financial Information. 

5.875% Senior Notes due 2022 

Interest on the 5.875% Senior Notes due 2022 accrues at the stated rate. The Company pays interest semi-annually in arrears on January 15 and July 15 

of each year. On or after January 15, 2017, the Company may, at its option, redeem all or part of the 5.875% Senior Notes due 2022 at the redemption 

prices set forth in the indenture governing the 5.875% Senior Notes due 2022. The indenture contains certain covenants, including limitations and 

restrictions on the Company and its subsidiary guarantors. Refer to Note 17- Condensed Consolidating Financial Information. 

Non-Recourse Debt 

Northwest Detention Center 

The remaining balance of the original debt service requirement under the $54.4 million note payable (“2011 Revenue Bonds”) to WEDFA is 

$30.0 million, of which $7.0 million is classified as current in the accompanying consolidated balance sheet as of September 30, 2018. The payment of 

principal and interest on the 2011 Revenue Bonds issued by WEDFA is non-recourse to GEO. The 2011 Revenue Bonds will mature in October 2021 

with fixed coupon rates of 5.25%. 

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As of September 30, 2018, included in current restricted cash and cash equivalents is $8.3 million of funds held in trust for debt service and other 

reserves with respect to the above mentioned note payable to WEDFA. 

Australia – Ravenhall 

In connection with a design and build correctional facility project agreement with the State, the Company entered into a syndicated facility agreement 

(the “Construction Facility”) with National Australia Bank Limited to provide debt financing for construction of the project. The Construction Facility 

provided for non-recourse funding up to AUD 791.0 million, or approximately $571.5 million, based on exchange rates as of September 30, 2018. 

Construction draws were funded throughout the project according to a fixed utilization schedule as defined in the Construction Facility. The term of the 

Construction Facility is through September 2019 and bears interest at a variable rate quoted by certain Australian banks plus 200 basis points. The 

project was developed under a public-private partnership financing structure with a capital contribution from the Company, which was made in January 

2017, of approximately AUD115 million, or $83.1 million, based on exchange rates as of September 30, 2018. The Company has begun negotiations for 

a refinancing transaction and anticipates completion of the refinancing transaction in the first quarter of 2019. As the Company currently does not yet 

have a financing agreement in place, the balance has been presented as current in the accompanying consolidated balance sheet as of September 30, 

2018. In accordance with the terms of the Construction Facility, upon completion and commercial acceptance of the correctional facility in the fourth 

quarter of 2017, in accordance with the contract, the State made a lump sum payment of AUD310 million, or approximately $224 million, based on 

exchange rates as of September 30, 2018, towards a portion of the outstanding principal. The remaining outstanding principal balance will be repaid 

over the term of the operating agreement. As of September 30, 2018, approximately $328 million was outstanding under the Construction Facility. The 

Company also entered into interest rate swap and interest rate cap agreements related to its non-recourse debt in connection with the project. Refer to 

Note 11 – Derivative Financial Instruments. 

Guarantees 

Australia 

The Company has entered into a guarantee in connection with the operating performance of a facility in Australia. The obligation amounted to 

approximately AUD 100.0 million, or $72.2 million, based on exchange rates as of September 30, 2018. The guarantee is secured by outstanding letters 

of credit under the Company’s Revolver as of September 30, 2018. 

At September 30, 2018, the Company also had ten other letters of credit outstanding under separate international facilities relating to performance 

guarantees of its Australian subsidiary totaling $14.7 million. 

South Africa 

In connection with the creation of South African Custodial Services Pty. Limited (“SACS”), the Company had entered into certain guarantees related to 

the financing, construction and operation of the prison. The Company had guaranteed certain obligations of SACS under its debt agreements to SACS’ 

senior lenders through the issuance of letters of credit under the Company’s Revolver. In July 2018, SACS settled all amounts due under the debt 

facilities and has therefore discharged the guaranteed obligations, therefore the guarantees related to these obligations were no longer necessary and the 

letters of credit were not renewed. Additionally, SACS is required to maintain funding in a rectification account maintained for the payment of certain 

costs in the event of contract termination. SACS has met the required funding obligation and there is no further requirement to maintain the required 

funding amount. 

In addition to the above, the Company had also agreed to provide a loan, if required, of up to 20 million South African Rand, or $1.5 million based on 

exchange rates as of September 30, 2018, referred to as the shareholder’s standby facility, to SACS for the purpose of financing SACS’ obligations 

under its contract with the South African government. No amounts have been funded under the shareholder’s standby facility. The Company’s 

obligations under the shareholder’s standby facility expire upon the earlier of full funding or SACS’s release from its obligations under the common 

terms agreement. SACS’ obligations in terms of the common terms agreements will expire in February 2019 with the final payment of the facility 

management fees when the Company’s obligations under the shareholder’s standby facility have expired. 

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The Company had also guaranteed certain obligations of SACS to the security trustee for SACS’ lenders. The Company secured its guarantee to the 

security trustee by ceding its rights to claims against SACS in respect of any loans or other finance agreements, and by pledging the Company’s shares 

in SACS. The Company’s liability under the guarantee is limited to the cession and pledge of shares. The guarantee will expire in February 2019 when 

all SACS obligation in terms of the finance agreements have been settled. 

United Kingdom 

In connection with the creation of GEOAmey, the Company and its joint venture partner guarantee the availability of working capital in equal 

proportion to ensure that GEOAmey can comply with current and future contractual commitments related to the performance of its operations. The 

Company and the 50% joint venture partner had each extended a £12 million line of credit, or $15.6 million, based on exchange rates as of 

September 30, 2018, of which £1.3 million, or $1.7 million, based on exchange rates as of September 30, 2018, was outstanding as of September 30, 

2018 to each joint venture partner. The Company’s maximum exposure relative to the joint venture is its note receivable of approximately $1.7 million, 

which is included in Other Non-Current Assets in the accompanying consolidated balance sheets, and any future financial support necessary to 

guarantee performance under the contract. In October 2018, the note receivable to each joint venture partner was paid off in full. 

Except as discussed above, the Company does not have any off balance sheet arrangements. 

13. COMMITMENTS, CONTINGENCIES AND OTHER 

Litigation, Claims and Assessments 

As previously reported and described in our prior periodic reports, including most recently in our Form 10-Q for the quarter ended June 30, 2018, 

on February 8, 2017, the Attorney General of the State of Mississippi filed a lawsuit in the Circuit Court for the First Judicial District of Hinds County, 

Mississippi against the Company, Cornell Companies, Inc., a subsidiary of the Company, Christopher B. Epps, the former Commissioner of the 

Mississippi Department of Corrections, and Cecil McCrory, a former consultant of the Company, alleging several statutory and common law claims. On 

July 16, 2018, the Company entered into a negotiated settlement and release agreement and the case was dismissed with no admission of liability by the 

Company. The negotiated settlement included a monetary payment to the State of Mississippi and such payment did not have a material effect on our 

results of operations, financial condition or cash flows. 

On October 22, 2014, former civil immigration detainees at the Aurora Immigration Detention Center filed a class action lawsuit against the 

Company in the United States District Court for the District of Colorado (the “Court”). The complaint alleges that the Company was in violation of the 

Colorado Minimum Wages of Workers Act and the federal Trafficking Victims Protection Act (“TVPA”). The plaintiff class claims that the Company 

was unjustly enriched as a result of the level of payment the detainees received for work performed at the facility, even though the voluntary work 

program as well as the wage rates and standards associated with the program that are at issue in the case are authorized by the Federal government under 

guidelines approved by the United States Congress. On July 6, 2015, the Court found that detainees were not employees under the Colorado Minimum 

Wage Order and dismissed this claim. In February 2017, the Court granted the plaintiff-class’ motion for class certification which the Company 

appealed to the 10th Circuit Court of Appeals. On February 9, 2018, a three-judge panel of the appellate court affirmed the class-certification order. A 

petition for rehearing en banc was denied on March 7, 2018. On October 2, 2018, the U.S. Supreme Court denied the Company’s petition for a writ of 

certiorari on the class certification order. The plaintiff class seeks actual damages, compensatory damages, exemplary damages, punitive damages, 

restitution, attorneys’ fees and costs, and such other relief as the Court may deem proper. In the time since the Colorado suit was initially filed, three 

similar lawsuits have been filed – two in Washington and one in California. In Washington, one of the two lawsuits was filed on September 9, 2017 by 

immigration detainees against the Company in the U.S. District Court for the Western District of Washington. The second was filed on September 20, 

2017 by the State Attorney General against the Company in the Superior Court of the State of Washington for Pierce County, which the Company 

removed to the U.S. District Court for the Western 

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District of Washington on October 9, 2017. In California, a class-action lawsuit was filed on December 19, 2017 by immigration detainees against the 

Company in the U.S. District Court Eastern Division of the Central District of California. All three lawsuits allege violations of the respective state’s 

minimum wage laws. However, the California lawsuit, like the Colorado suit, also includes claims based that the Company violated the TVPA and 

California’s equivalent state statute. The Company intends to take all necessary steps to vigorously defend itself and has consistently refuted the 

allegations and claims in these lawsuits. The Company has not recorded an accrual relating to these matters at this time, as a loss is not considered 

probable nor reasonably estimable at this stage of the lawsuit. 

The nature of the Company’s business exposes it to various types of third-party legal claims or litigation against the Company, including, but not limited 

to, civil rights claims relating to conditions of confinement and/or mistreatment, sexual misconduct claims brought by prisoners or detainees, medical 

malpractice claims, product liability claims, intellectual property infringement claims, claims relating to employment matters (including, but not limited 

to, employment discrimination claims, union grievances and wage and hour claims), property loss claims, environmental claims, automobile liability 

claims, indemnification claims by its customers and other third parties, contractual claims and claims for personal injury or other damages resulting 

from contact with the Company’s facilities, programs, electronic monitoring products, personnel or prisoners, including damages arising from a 

prisoner’s escape or from a disturbance or riot at a facility. The Company does not expect the outcome of any pending claims or legal proceedings to 

have a material adverse effect on its financial condition, results of operations or cash flows. However, the results of these claims or proceedings cannot 

be predicted with certainty, and an unfavorable resolution of one or more of these claims or proceedings could have a material adverse effect on the 

Company’s financial condition, results of operations or cash flows. 

Other Assessment 

A state non-income tax audit completed in 2016 included tax periods for which the state tax authority had a number of years ago processed a 

substantial tax refund. At the completion of the audit fieldwork, the Company received a notice of audit findings disallowing deductions that were 

previously claimed by the Company, approved by the state tax authority and served as the basis for the approved refund claim. In early January 2017, 

the Company received a formal Notice of Assessment of Taxes and Demand for Payment from the taxing authority disallowing the deductions. The total 

tax, penalty and interest assessed is approximately $19.6 million. The Company has filed an administrative protest and disagrees with the assessment 

and intends to take all necessary steps to vigorously defend its position. The Company has established a reserve based on its estimate of the most 

probable loss based on the facts and circumstances known to date and the advice of outside counsel in connection with this matter. 

Commitments 

The Company currently has contractual commitments for a number of projects using Company financing. The Company’s management estimates that 

the cost of these existing capital projects will be approximately $229.4 million of which $188.7 million was spent through the first nine months of 2018. 

The Company estimates the remaining capital requirements related to these capital projects will be $40.7 million which will be spent through 2019. 

Idle Facilities 

As of September 30, 2018, the Company is marketing approximately 4,700 vacant beds at four of its U.S. Corrections & Detention idle facilities to 

potential customers. The carrying values of these idle facilities, which are included in Property and Equipment, Net in the accompanying consolidated 

balance sheets, totaled $124.1 million as of September 30, 2018, excluding equipment and other assets that can be easily transferred for use at other 

facilities. There was no indication of impairment related to the Company’s idle facilities at September 30, 2018. 

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14. BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION 

Operating and Reporting Segments 

The Company conducts its business through four reportable business segments: the U.S. Corrections & Detention segment; the GEO Care segment; the 

International Services segment; and the Facility Construction & Design segment. The Company’s segment revenues from external customers and a 

measure of segment profit are as follows (in thousands): 

Three Months Ended Nine Months Ended

September 30,

2018

September 30,

2017

September 30,

2018

September 30,

2017

Revenues:

U.S. Corrections & Detention $ 379,351 $ 365,071 $ 1,107,016 $ 1,073,840

GEO Care 141,808 134,610 431,819 377,740

International Services 62,371 45,641 193,121 130,261

Facility Construction & Design [1] — 21,437 — 112,602

Total revenues $ 583,530 $ 566,759 $ 1,731,956 $ 1,694,443

Operating income (loss) from segments:

U.S. Corrections & Detention $ 77,885 $ 77,551 $ 224,386 $ 224,838

GEO Care 35,959 31,293 102,795 94,062

International Services 3,583 3,410 10,927 8,413

Facility Construction & Design [1] — (278) — (1,620) 

Operating income from segments $ 117,427 $ 111,976 $ 338,108 $ 325,693

[1] Facility Construction & Design activity related to the Company’s Ravenhall correctional facility project which was completed during the fourth 

quarter of 2017. 

Pre-Tax Income Reconciliation of Segments 

The following is a reconciliation of the Company’s total operating income from its reportable segments to the Company’s income before income taxes 

and equity in earnings of affiliates (in thousands): 

Three Months Ended Nine Months Ended

September 30,

2018

September 30,

2017

September 30,

2018

September 30,

2017

Total operating income from segments $ 117,427 $ 111,976 $ 338,108 $ 325,693

Unallocated amounts:

General and Administrative Expenses (47,647) (49,074) (136,927) (143,866) 

Net Interest Expense (29,563) (24,071) (84,585) (70,731) 

Income before income taxes and equity in earnings of 

affiliates $ 40,217 $ 38,831 $ 116,596 $ 111,096

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Equity in Earnings of Affiliates 

Equity in earnings of affiliates includes the Company’s 50% owned joint ventures in SACS, located in South Africa, and GEOAmey, located in the 

United Kingdom. The Company’s investments in these entities are accounted for under the equity method of accounting. The Company’s investments in 

these entities are presented as a component of Other Non-Current Assets in the accompanying consolidated balance sheets. 

The Company has recorded $2.2 million and $5.9 million in earnings, net of tax, for SACS operations during the three and nine months ended 

September 30, 2018, and $1.1 million and $3.4 million in earnings, net of tax, for SACS operations during the three months and nine months ended 

September 30, 2017, respectively, which are included in equity in earnings of affiliates, net of income tax provision in the accompanying consolidated 

statements of operations. As of September 30, 2018 and December 31, 2017, the Company’s investment in SACS was $12.8 million and $18.1 million, 

respectively, and represents its share of cumulative reported earnings. 

The Company has recorded $0.6 million and $1.2 million in earnings, net of tax, for GEO Amey’s operations during the three and nine months ended 

September 30, 2018, and $0.2 million and $0.8 million for the three and nine months ended September 30, 2017, respectively, which are included in 

equity in earnings of affiliates, net of income tax provision in the accompanying consolidated statements of operations. As of September 30, 2018 and 

December 31, 2017, the Company’s investment in GEOAmey was $3.9 million and $2.7 million, respectively, and represents its share of cumulative 

reported earnings. 

15. BENEFIT PLANS 

The following table summarizes key information related to the Company’s pension plans and retirement agreements (in thousands): 

Nine Months

Ended

September 30,

2018

Year Ended

December 31,

2017

Change in Projected Benefit Obligation

Projected benefit obligation, beginning of period $ 32,820 $ 28,624

Service cost 900 1,001

Interest cost 931 1,228

Actuarial loss — 2,474

Benefits paid (396) (507) 

Projected benefit obligation, end of period $ 34,255 $ 32,820

Change in Plan Assets

Plan assets at fair value, beginning of period $ — $ — 

Company contributions 396 507

Benefits paid (396) (507) 

Plan assets at fair value, end of period $ — $ — 

Unfunded Status of the Plan $ (34,255) $ (32,820) 

Three Months Ended Nine Months Ended

September 30,

2018

September 30,

2017

September 30,

2018

September 30,

2017

Components of Net Periodic Benefit Cost

Service cost $ 300 $ 250 $ 900 $ 751

Interest cost 310 307 931 921

Net loss 133 73 399 218

Net periodic pension cost $ 743 $ 630 $ 2,230 $ 1,890

The long-term portion of the pension liability as of September 30, 2018 and December 31, 2017 was $33.9 million and $32.4 million, respectively, and 

is included in Other Non-Current Liabilities in the accompanying consolidated balance sheets. 

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16. RECENT ACCOUNTING PRONOUNCEMENTS 

The Company implemented the following accounting standards during the nine months ended September 30, 2018: 

In May 2014, the Financial Accounting Standards Board (“FASB”), issued a new standard related to revenue recognition (ASU 2014-09, 

“Revenue from Contracts with Customers”. Under the new standard, revenue is recognized when a customer obtains control of promised goods or 

services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In 

addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with 

customers. The FASB has issued several amendments to the standard, including clarification on accounting for licenses of intellectual property and 

identifying performance obligations. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full 

retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the 

modified retrospective transition method). The new standard became effective for the Company beginning on January 1, 2018 and the Company used 

the modified retrospective transition method to implement this standard. The adoption of this standard did not have a material impact on the Company’s 

financial position, results of operations or cash flows. Disclosures related to the nature, amount and timing of revenue and cash flows arising from 

contracts with customers are included in Note 2 – Revenue Recognition. 

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows,” which clarified the presentation and classification in the 

statement of cash flows for eight specific cash flow issues with the objective of reducing diversity in practice. These cash flow issues include debt 

prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business 

combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies (including 

bank-owned life insurance policies), distributions received from equity method investees, beneficial interests in securitization transactions and also 

addresses separately identified cash flows and the application of the predominance principle. The amendments in ASU No. 2016-15 became effective 

for the Company on January 1, 2018. The Company elected to apply the cumulative earnings approach to classify distributions received from its equity 

method investees and determined that the distributions are a return on investment and are therefore classified as cash inflows from operating activities. 

The implementation of this standard did not have a material impact on the Company’s financial position, results of operations or cash flows. 

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes – Intra-Entity Transfers of Assets Other Than Inventory,” as a part of its 

simplification initiative. The amendments in this standard require entities to recognize the income tax consequences of an intra-entity transfer of an asset 

other than inventory when the transfer occurs. Under prior generally accepted accounting principles, the recognition of current and deferred income 

taxes for an intra-entity asset transfer was prohibited until the asset has been sold to an outside party. The new standard became effective for the 

Company on January 1, 2018. The amendments in this update should be applied on a modified retrospective basis through a cumulative-effect 

adjustment directly to retained earnings as of the beginning of the adoption period. The adoption of this standard did not have a material impact on the 

Company’s financial position, results of operations or cash flows. 

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows – Restricted Cash,” which requires that a statement of cash 

flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash 

equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents 

when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new standard became effective for 

the Company on January 1, 2018 and was applied using a retrospective transition method to each period presented. The adoption of this standard did not 

have a material impact on the Company’s financial position, results of operations or cash flows. As a result of the adoption of this standard, the 

Consolidated Statement of Cash Flows for the nine months ended September 30, 2017 has been retrospectively adjusted. Refer to Note 7 – Restricted 

Cash and Cash Equivalents for additional disclosures required under the standard. 

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In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations,” which clarifies the definition of a business with the objective of 

adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The 

update provides a screen to determine when an integrated set of assets and activities (collectively referred to as a “set”) is not a business. The screen 

requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group 

of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is 

not met, the amendments in this update (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process 

that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing 

elements. The amendments provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The 

amendments in this update became effective for the Company on January 1, 2018. The implementation of this standard did not have a material impact 

on the Company’s financial position, results of operations or cash flows. 

In March 2017, the FASB issued ASU No. 2017-07 “Compensation – Retirement Benefits (Topic 715)-Improving the Presentation of Net Periodic 

Pension Cost and Net Periodic Postretirement Benefit Cost”. This guidance revises how employers that sponsor defined benefit pension and other 

postretirement plans present the net periodic benefit cost in their income statement and requires that the service cost component of net periodic benefit 

cost be presented in the same income statement line items as other employee compensation costs from services rendered during the period. Of the 

components of net periodic benefit cost, only the service cost component will be eligible for asset capitalization. The other components of the net 

periodic benefit cost must be presented separately from the line items that include the service cost and outside of any subtotal of operating income on the 

income statement. The new standard became effective for the Company on January 1, 2018. The adoption of this standard did not have a material impact 

on the Company’s financial position, results of operations or cash flows. 

In May 2017, the FASB issued ASU No. 2017-10 “Service Concession Arrangements – Determining the Customer of the Operation Services”. 

The objective of this guidance is to reduce diversity in practice and provide clarification on how an operating entity determines the customer of the 

operation services for transactions within the scope of Topic 853, Service Concessions Arrangements. The amendments in this update clarify that the 

grantor is the customer of the operation services in all cases for such arrangements. The new standard was effective for the Company beginning on 

January 1, 2018. The adoption of this standard did not have a material impact on the Company’s financial position, results of operations or cash flows. 

In May 2017, the FASB issued ASU No. 2017-09 “Compensation – Stock Compensation”. The objective of this guidance is to provide clarity and 

reduce both (1) diversity in practice and (2) cost and complexity when applying modification accounting for changes in the terms or conditions of sharebased payment awards. An entity should account for the effects of a modification unless all of the following factors are met: (i) the fair value of the 

modified award is the same as the fair value of the original award immediately before the award is modified; (ii) the vesting conditions of the modified 

award are the same as the vesting conditions of the original award immediately before the original award is modified; and (iii) the classification of the 

modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original 

award is modified. The new standard became effective for the Company on January 1, 2018. The amendments in this update should be applied 

prospectively to an award modified on or after the adoption date. The adoption of this standard did not have a material impact on the Company’s 

financial position, results of operations or cash flows. 

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The following accounting standards will be adopted in future periods: 

In August 2018, the FASB issued ASU No. 2018-14 “Compensation-Retirement Benefits-Defined Benefit Plans-General (Topic 715.20)” as a part 

of its disclosure framework project. The amendments in this update remove, modify and add certain disclosures primarily related to amounts in 

accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, explanations 

for reasons for significant gains and losses related to changes in the benefit obligation for the period, and projected and accumulated benefit obligations. 

The new standard is effective for the Company beginning January 1, 2021. The adoption of this standard is not expected to have a material impact on 

the Company’s financial position, results of operations or cash flows. 

In August 2018, the FASB issued ASU No. 2018-13 “Fair Value Measurement (Topic 820)” as a part of its disclosure framework project. The 

amendments in this update remove, modify and add certain disclosures primarily related to transfers between Level 1 and Level 2 of the fair value 

hierarchy, various disclosures related to Level 3 fair value measurements and investments in certain entities that calculate net asset value. The new 

standard is effective for the Company beginning January 1, 2020. The adoption of this standard is not expected to have a material impact on the 

Company’s financial position, results of operations or cash flows. 

In June 2018, the FASB issued ASU No. 2018-07 “Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee ShareBased Payment Accounting” as a part of its Simplification Initiative. The amendments in this update expand the scope of Topic 718 to include sharebased payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee 

awards except for specific guidance on inputs to an option pricing model and the period of time over which share-based payment awards vest and the 

pattern of cost recognition over that period. The amendment specify that Topic 718 applies to all share-based payment transactions in which a grantor 

acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify 

that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with 

selling goods or services to customers as part of a contract accounted for under Topic 606-”Revenue from Contracts with Customers.” The new standard 

is effective for the Company beginning January 1, 2019. The adoption of this standard is not expected to have a material impact on the Company’s 

financial position, results of operations or cash flows. 

In February 2018, the FASB issued ASU No. 2018-02 “Income Statement-Reporting Comprehensive Income-Reclassification of Certain Tax 

Effects from Accumulated Other Comprehensive Income”. The amendments in this update allow an entity to elect to reclassify the income tax effects 

resulting from the Tax Cuts and Jobs Act on items within accumulated other comprehensive income to retained earnings. The new standard is effective 

for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The 

adoption of this standard is not expected to have a material impact on the Company’s financial position, results of operations or cash flows. 

In August 2017, the FASB issued ASU No. 2017-12 “Derivatives and Hedging – Targeted Improvements to Accounting for Hedging Activities.” 

The objective of this guidance is to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk 

management activities in its financial statements. Certain of the amendments in this update as they relate to cash flow hedges, eliminate the requirement 

to separately record hedge ineffectiveness currently in earnings. Instead, the entire change in the fair value of the hedging instrument is recorded in other 

comprehensive income. Those amounts are reclassified to earnings in the same income statement line item that is used to present the earnings effect of 

the hedged item when the hedged item affects earnings. The new standard is effective for the Company beginning January 1, 2019. The adoption of this 

standard is not expected to have a material impact on the Company’s financial position, results of operations or cash flows. 

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In February 2016, FASB issued ASU 2016-02, “Leases,” which requires entities to recognize lease assets and lease liabilities on the balance sheet 

and to disclose key information about leasing arrangements. For finance leases and operating leases, a lessee should recognize in the statement of 

financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the 

lease term with each initially measured at the present value of the lease payments. The FASB has recently issued several amendments to the standard, 

including accounting for land easements. The amendments in ASU 2016-02 are effective for public companies for fiscal years beginning after 

December 15, 2018, including interim periods within those fiscal years. In July 2018, the FASB issued ASU 2018-11 which provides for an optional 

transition method where an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the 

opening balance of retained earnings. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it 

adopts the new lease standard will continue to be in accordance with current generally accepted accounting principles (Topic 940, “Leases”). 

Alternatively, lessees and lessors can elect to recognize and measure leases at the beginning of the earliest period presented using a modified 

retrospective approach. The Company has elected to apply the new lease standard at the adoption date on January 1, 2019 under the optional transition 

method as outlined in ASU 2018-11. There are also several practical expedients that entities may elect upon transition relating to short-term leases 

(twelve-month terms or less), non-lease components, reassessing certain lease decision points for existing leases, using hindsight in determining the 

lease term and land easements. With regard to these practical expedients, the Company has elected not to apply the recognition requirements to lease 

arrangements that have terms of twelve months or less. The Company has also elected to not reassess the major lease decision points for existing leases 

(whether a contract contains a lease, how a lease should be classified and whether previously capitalized initial direct costs meet the new standard 

definition). The Company has implemented a lease management software application tool and is currently assessing the impact that the adoption of ASU 

2016-02 will have on its consolidated financial position or results of operations, but expects that it will result in a significant increase in its long-term 

assets and liabilities given the significant number of leases as disclosed in Note 17 – Commitments and Contingencies in the Company’s Annual Report 

on Form 10-K for the year ended December 31, 2017. 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public 

Accountants and the SEC did not, or are not expected to, have a material effect on the Company’s results of operations or financial position. 

17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION 

As of September 30, 2018, the Company’s 6.00% Senior Notes, 5.125% Senior Notes, the 5.875% Senior Notes due 2022 and the 5.875% Senior Notes 

due 2024 were fully and unconditionally guaranteed on a joint and several senior unsecured basis by the Company and certain of its wholly-owned 

domestic subsidiaries (the “Subsidiary Guarantors”). The following condensed consolidating financial information, which has been prepared in 

accordance with the requirements for presentation of Rule 3-10(d) of Regulation S-X promulgated under the Securities Act, presents the condensed 

consolidating financial information separately for: 

(i) The GEO Group, Inc., as the issuer of the notes; 

(ii) The Subsidiary Guarantors, on a combined basis, which are 100% owned by The GEO Group, Inc., and which are guarantors of the notes; 

(iii) The Company’s other subsidiaries, on a combined basis, which are not guarantors of the notes (the “Non-Guarantor Subsidiaries”); 

(iv) Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between or among the Company, 

the Subsidiary Guarantors and the Subsidiary Non-Guarantors and (b) eliminate the investments in the Company’s subsidiaries; and 

(v) The Company and its subsidiaries on a consolidated basis. 

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) 

(dollars in thousands) 

(unaudited) 

For the Three Months Ended September 30, 2018

The GEO Group, Inc.

Combined

Subsidiary

Guarantors

Combined

Non-Guarantor

Subsidiaries Eliminations Consolidated

Revenues $ 208,607 $ 479,175 $ 65,028 $ (169,280) $ 583,530

Operating expenses 171,038 379,892 53,156 (169,280) 434,806

Depreciation and amortization 6,742 23,621 934 — 31,297

General and administrative expenses 16,878 25,568 5,201 — 47,647

Operating income 13,949 50,094 5,737 — 69,780

Interest income 3,415 1,159 8,660 (4,806) 8,428

Interest expense (20,765) (13,714) (8,318) 4,806 (37,991) 

Income (loss) before income taxes and equity in earnings 

of affiliates (3,401) 37,539 6,079 — 40,217

Income tax provision 162 2,446 1,115 — 3,723

Equity in earnings of affiliates, net of income tax 

provision — — 2,735 — 2,735

Income (loss) before equity in income of consolidated 

subsidiaries (3,563) 35,093 7,699 — 39,229

Income from consolidated subsidiaries, net of income tax 

provision 42,792 — — (42,792) — 

Net income 39,229 35,093 7,699 (42,792) 39,229

Net loss attributable to noncontrolling interests — — 60 — 60

Net income attributable to The GEO Group, Inc. $ 39,229 $ 35,093 $ 7,759 $ (42,792) $ 39,289

Net income $ 39,229 $ 35,093 $ 7,699 $ (42,792) $ 39,229

Other comprehensive income (loss), net of tax — (761) 205 — (556) 

Total comprehensive income $ 39,229 $ 34,332 $ 7,904 $ (42,792) $ 38,673

Comprehensive loss attributable to noncontrolling 

interests — — 72 — 72

Comprehensive income attributable to The GEO Group, 

Inc. $ 39,229 $ 34,332 $ 7,976 $ (42,792) $ 38,745

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) 

(dollars in thousands) 

(unaudited) 

For the Three Months Ended September 30, 2017

The GEO Group, Inc.

Combined

Subsidiary

Guarantors

Combined

Non-Guarantor

Subsidiaries Eliminations Consolidated

Revenues $ 171,553 $ 464,140 $ 69,698 $ (138,632) $ 566,759

Operating expenses 139,165 364,834 57,767 (138,632) 423,134

Depreciation and amortization 6,104 24,623 922 — 31,649

General and administrative expenses 14,699 28,066 6,309 — 49,074

Operating income 11,585 46,617 4,700 — 62,902

Interest income 2,688 1,629 14,871 (4,540) 14,648

Interest expense (18,148) (13,093) (12,018) 4,540 (38,719) 

Income before income taxes and equity in earnings of 

affiliates (3,875) 35,153 7,553 — 38,831

Income tax provision 147 811 762 — 1,720

Equity in earnings of affiliates, net of income tax 

provision — — 1,342 — 1,342

Income (loss) before equity in income of consolidated 

subsidiaries (4,022) 34,342 8,133 — 38,453

Income from consolidated subsidiaries, net of income tax 

provision 42,475 — — (42,475) — 

Net income 38,453 34,342 8,133 (42,475) 38,453

Net loss attributable to noncontrolling interests — — 36 — 36

Net income attributable to The GEO Group, Inc. $ 38,453 $ 34,342 $ 8,169 $ (42,475) $ 38,489

Net income $ 38,453 $ 34,342 $ 8,133 $ (42,475) $ 38,453

Other comprehensive income, net of tax — 64 1,561 — 1,625

Total comprehensive income $ 38,453 $ 34,406 $ 9,694 $ (42,475) $ 40,078

Comprehensive loss attributable to noncontrolling 

interests — — 34 — 34

Comprehensive income attributable to The GEO Group, 

Inc. $ 38,453 $ 34,406 $ 9,728 $ (42,475) $ 40,112

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) 

(dollars in thousands) 

(unaudited) 

For the Nine Months Ended September 30, 2018

The GEO Group, Inc.

Combined

Subsidiary

Guarantors

Combined

Non-Guarantor

Subsidiaries Eliminations Consolidated

Revenues $ 606,424 $1,412,868 $ 201,090 $ (488,426) $1,731,956

Operating expenses 483,982 1,138,897 164,859 (488,426) 1,299,312

Depreciation and amortization 19,766 71,759 3,011 — 94,536

General and administrative expenses 47,499 73,753 15,675 — 136,927

Operating income 55,177 128,459 17,545 — 201,181

Interest income 10,998 4,023 26,951 (15,778) 26,194

Interest expense (59,034) (42,133) (25,390) 15,778 (110,779) 

Income before income taxes and equity in earnings of 

affiliates 7,141 90,349 19,106 — 116,596

Income tax provision 1,055 6,188 4,950 — 12,193

Equity in earnings of affiliates, net of income tax 

provision — — 7,071 — 7,071

Income before equity in income of consolidated 

subsidiaries 6,086 84,161 21,227 — 111,474

Income from consolidated subsidiaries, net of income 

tax provision 105,388 — — (105,388) — 

Net income 111,474 84,161 21,227 (105,388) 111,474

Net loss attributable to noncontrolling interests — — 223 — 223

Net income attributable to The GEO Group, Inc. $ 111,474 $ 84,161 $ 21,450 $ (105,388) $ 111,697

Net income $ 111,474 $ 84,161 $ 21,227 $ (105,388) $ 111,474

Other comprehensive income (loss), net of tax — (31) (1,332) — (1,363) 

Total comprehensive income $ 111,474 $ 84,130 $ 19,895 $ (105,388) $ 110,111

Comprehensive loss attributable to noncontrolling 

interests — — 247 — 247

Comprehensive income attributable to The GEO Group, 

Inc. $ 111,474 $ 84,130 $ 20,142 $ (105,388) $ 110,358

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) 

(dollars in thousands) 

(unaudited) 

For the Nine Months Ended September 30, 2017

The GEO Group, Inc.

Combined

Subsidiary

Guarantors

Combined

Non-Guarantor

Subsidiaries Eliminations Consolidated

Revenues $ 520,986 $1,342,620 $ 250,618 $ (419,781) $1,694,443

Operating expenses 406,576 1,076,232 213,259 (419,781) 1,276,286

Depreciation and amortization 18,319 71,404 2,741 — 92,464

General and administrative expenses 43,939 78,479 21,448 — 143,866

Operating income 52,152 116,505 13,170 — 181,827

Interest income 12,793 2,858 39,175 (15,855) 38,971

Interest expense (51,391) (41,353) (32,813) 15,855 (109,702) 

Income before income taxes and equity in earnings of 

affiliates 13,554 78,010 19,532 — 111,096

Income tax provision 441 3,058 2,091 — 5,590

Equity in earnings of affiliates, net of income tax 

provision — — 4,255 — 4,255

Income before equity in income of consolidated 

subsidiaries 13,113 74,952 21,696 — 109,761

Income from consolidated subsidiaries, net of income 

tax provision 96,648 — — (96,648) — 

Net income $ 109,761 $ 74,952 $ 21,696 $ (96,648) $ 109,761

Net loss attributable to noncontrolling interests — — 123 — 123

Net income attributable to The GEO Group, Inc. $ 109,761 $ 74,952 $ 21,819 $ (96,648) $ 109,884

Net income $ 109,761 $ 74,952 $ 21,696 $ (96,648) $ 109,761

Other comprehensive income, net of tax — 175 4,586 — 4,761

Total comprehensive income $ 109,761 $ 75,127 $ 26,282 $ (96,648) $ 114,522

Comprehensive loss attributable to noncontrolling 

interests — — 119 — 119

Comprehensive income attributable to The GEO Group, 

Inc. $ 109,761 $ 75,127 $ 26,401 $ (96,648) $ 114,641

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CONDENSED CONSOLIDATING BALANCE SHEET 

(dollars in thousands) 

(unaudited) 

As of September 30, 2018

The GEO Group, Inc.

Combined

Subsidiary

Guarantors

Combined

Non-Guarantor

Subsidiaries Eliminations Consolidated

ASSETS

Cash and cash equivalents $ 9,193 $ 18,059 $ 38,755 $ — $ 66,007

Restricted cash and cash equivalents 5,652 — 49,279 — 54,931

Accounts receivable, less allowance for doubtful accounts 178,579 187,231 33,695 4,105 403,610

Contract receivable, current portion — — 9,420 — 9,420

Prepaid expenses and other current assets 2,153 26,183 11,037 (1,786) 37,587

Total current assets 195,577 231,473 142,186 2,319 571,555

Restricted Cash and Investments — 23,476 5,463 — 28,939

Property and Equipment, Net 843,558 1,217,597 86,850 — 2,148,005

Non-Current Contract Receivable — — 384,794 — 384,794

Assets Held for Sale 705 1,929 — — 2,634

Intercompany Receivable 980,555 126,525 24,460 (1,131,540) — 

Non-Current Deferred Income Tax Assets 863 23,913 1,501 — 26,277

Goodwill — 775,955 413 — 776,368

Intangible Assets, Net — 237,345 602 — 237,947

Investment in Subsidiaries 1,516,564 458,229 2,190 (1,976,983) — 

Other Non-Current Assets 8,711 115,759 20,245 (78,895) 65,820

Total Assets $ 3,546,533 $3,212,201 $ 668,704 $(3,185,099) $4,242,339

LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts payable $ 11,967 $ 64,568 $ 5,749 $ — $ 82,284

Accrued payroll and related taxes — 33,424 20,173 — 53,597

Accrued expenses and other current liabilities 43,371 121,258 30,511 2,319 197,459

Current portion of capital lease obligations, long-term debt 

and non-recourse debt 8,000 1,998 330,145 — 340,143

Total current liabilities 63,338 221,248 386,578 2,319 673,483

Non-Current Deferred Income Tax Liabilities — — 8,757 — 8,757

Intercompany Payable 118,478 979,528 33,534 (1,131,540) — 

Other Non-Current Liabilities 1,337 157,333 9,439 (78,895) 89,214

Capital Lease Obligations — 4,954 — — 4,954

Long-Term Debt 2,282,399 — 80,919 — 2,363,318

Non-Recourse Debt — — 22,201 — 22,201

Commitments & Contingencies and Other

Shareholders’ Equity:

The GEO Group, Inc. Shareholders’ Equity 1,080,981 1,849,138 127,845 (1,976,983) 1,080,981

Noncontrolling Interests — — (569) — (569) 

Total Shareholders’ Equity 1,080,981 1,849,138 127,276 (1,976,983) 1,080,412

Total Liabilities and Shareholders’ Equity $ 3,546,533 $3,212,201 $ 668,704 $(3,185,099) $4,242,339

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CONDENSED CONSOLIDATING BALANCE SHEET 

(dollars in thousands) 

As of December 31, 2017

The GEO Group, Inc.

Combined

Subsidiary

Guarantors

Combined

Non-Guarantor

Subsidiaries Eliminations Consolidated

ASSETS

Cash and cash equivalents $ 54,666 $ — $ 26,711 $ — $ 81,377

Restricted cash and cash equivalents — — 44,932 — 44,932

Accounts receivable, less allowance for doubtful accounts 130,354 225,029 34,533 — 389,916

Contract receivable, current portion — — 18,142 — 18,142

Prepaid expenses and other current assets 2,589 24,163 18,590 — 45,342

Total current assets 187,609 249,192 142,908 — 579,709

Restricted Cash and Investments — 25,715 2,284 — 27,999

Property and Equipment, Net 777,404 1,209,816 90,903 — 2,078,123

Assets Held for Sale — 3,915 — — 3,915

Non-Current Contract Receivable — — 404,309 404,309

Intercompany Receivable 1,130,189 88,534 28,218 (1,246,941) — 

Non-Current Deferred Income Tax Assets 863 23,913 1,501 — 26,277

Goodwill — 778,504 447 — 778,951

Intangible Assets, Net — 254,531 808 — 255,339

Investment in Subsidiaries 1,336,665 456,076 2,190 (1,794,931) — 

Other Non-Current Assets 11,141 115,330 25,210 (79,395) 72,286

Total Assets $ 3,443,871 $3,205,526 $ 698,778 $(3,121,267) $4,226,908

LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts payable $ 20,643 $ 65,475 $ 6,469 $ — $ 92,587

Accrued payroll and related taxes — 51,780 19,952 — 71,732

Accrued expenses and other current liabilities 40,344 115,636 20,344 — 176,324

Current portion of capital lease obligations, long-term debt 

and non-recourse debt 8,000 1,870 19,050 — 28,920

Total current liabilities 68,987 234,761 65,815 — 369,563

Non-Current Deferred Income Tax Liabilities — — 8,757 — 8,757

Intercompany Payable 79,984 1,129,590 37,367 (1,246,941) — 

Other Non-Current Liabilities 4,674 157,200 14,223 (79,395) 96,702

Capital Lease Obligations — 6,059 — — 6,059

Long-Term Debt 2,090,985 — 90,559 — 2,181,544

Non-Recourse Debt — — 365,364 — 365,364

Commitments & Contingencies and Other

Shareholders’ Equity:

The GEO Group, Inc. Shareholders’ Equity 1,199,241 1,677,916 117,015 (1,794,931) 1,199,241

Noncontrolling Interests — — (322) — (322) 

Total Shareholders’ Equity 1,199,241 1,677,916 116,693 (1,794,931) 1,198,919

Total Liabilities and Shareholders’ Equity $ 3,443,871 $3,205,526 $ 698,778 $(3,121,267) $4,226,908

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS 

(dollars in thousands) 

(unaudited) 

For the Nine Months Ended September 30, 2018

The GEO Group, Inc.

Combined

Subsidiary

Guarantors

Combined

Non-Guarantor

Subsidiaries Consolidated

Cash Flow from Operating Activities:

Net cash provided by operating activities $ 112,599 $ 70,040 $ 37,584 $ 220,223

Cash Flow from Investing Activities:

Insurance proceeds – damaged property — 5,998 — 5,998

Proceeds from sale of property and equipment — — 2,061 2,061

Proceeds from sale of assets held for sale — 3,797 — 3,797

Change in restricted investments — (2,413) — (2,413) 

Capital expenditures (95,461) (64,015) (2,014) (161,490) 

Net cash (used in) provided by investing activities (95,461) (56,633) 47 (152,047) 

Cash Flow from Financing Activities:

Proceeds from long-term debt 372,000 — — 372,000

Payments on long-term debt (183,000) — (3,033) (186,033) 

Payments on non-recourse debt — — (9,636) (9,636) 

Taxes paid related to net share settlements of equity awards (4,452) — — (4,452) 

Proceeds from issuance of common stock in connection with 

ESPP 404 — — 404

Payment for repurchases of common stock (70,446) — — (70,446) 

Debt issuance costs (990) — — (990) 

Proceeds from stock options exercised 1,781 — — 1,781

Dividends paid (172,256) — — (172,256) 

Net cash used in financing activities (56,959) — (12,669) (69,628) 

Effect of Exchange Rate Changes on Cash, Cash Equivalents and 

Restricted Cash and Cash Equivalents — — (5,392) (5,392) 

Net (Decrease) Increase in Cash. Cash Equivalents and Restricted 

Cash and Cash Equivalents (39,821) 13,407 19,570 (6,844) 

Cash, Cash Equivalents and Restricted Cash and Cash Equivalents, 

beginning of period 54,666 4,952 73,927 133,545

Cash, Cash Equivalents and Restricted Cash and Cash Equivalents, 

end of period $ 14,845 $ 18,359 $ 93,497 $ 126,701

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS 

(dollars in thousands) 

(unaudited) 

For the Nine Months Ended September 30, 2017

The GEO Group, Inc.

Combined

Subsidiary

Guarantors

Combined

Non-Guarantor

Subsidiaries Consolidated

Cash Flow from Operating Activities:

Net cash provided by (used in) operating activities $ 15,303 $ 79,088 $ (36,486) $ 57,905

Cash Flow from Investing Activities:

Acquisition of CEC, net of cash acquired (353,555) — — (353,555) 

Proceeds from sale of property and equipment 845 — 11 856

Insurance proceeds – damaged property 86 — — 86

Change in restricted investments — (3,810) — (3,810) 

Capital expenditures (34,679) (61,432) (8,019) (104,130) 

Cash used in by investing activities (387,303) (65,242) (8,008) (460,553) 

Net cash used in investing activities

Cash Flow from Financing Activities:

Proceeds from long-term debt 1,324,865 — — 1,324,865

Payments on long-term debt (1,093,088) — — (1,093,088) 

Payments on non-recourse debt — — (68,887) (68,887) 

Proceeds from non-recourse debt — — 123,785 123,785

Taxes paid related to net share settlements of equity awards (4,122) — — (4,122) 

Issuance of common stock under prospectus supplement 275,867 — — 275,867

Proceeds from issuance of common stock in connection with 

ESPP — — 382 382

Debt issuance costs (8,701) — (769) (9,470) 

Proceeds from stock options exercised 6,786 — — 6,786

Dividends paid (169,152) — — (169,152) 

Net cash provided by financing activities 332,455 — 54,511 386,966

Effect of Exchange Rate Changes on Cash, Cash Equivalents and 

Restricted Cash and Cash Equivalents — — 863 863

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted 

Cash and Cash Equivalents (39,545) 13,846 10,880 (14,819) 

Cash, Cash Equivalents and Restricted Cash and Cash Equivalents, 

beginning of period 45,736 4,922 39,699 90,357

Cash, Cash Equivalents and Restricted Cash and Cash Equivalents, 

end of period $ 6,191 $ 18,768 $ 50,579 $ 75,538

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18. SUBSEQUENT EVENTS 

Dividend 

On October 15, 2018, the Board of Directors declared a quarterly cash dividend of $0.47 per share of common stock which was paid on 

November 2, 2018 to shareholders of record as of the close of business on October 26, 2018. 

Hurricane Michael 

On October 10, 2018, Hurricane Michael impacted the Florida Panhandle, which resulted in widespread damage to the area. As a result, the 

Company’s managed-only Bay Correctional Facility was impacted and incurred significant property damage. As a result, inmates housed in that facility 

have been temporarily re-located to other facilities. The Company is continuing to make a full assessment of the extent of the impact. 

The Company maintains property and business interruption insurance, subject to certain deductibles, and is currently assessing claims under such 

policies; however, the timing and amount of insurance proceeds are uncertain and may not be sufficient to cover all losses. Timing differences are likely 

to exist between the capital expenditures made to repair or restore the property and recognition and receipt of insurance proceeds reflected in our 

financial statements. The Company expects that its results of operations related to the facility will be adversely impacted in the near term. 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 

Forward-Looking Information 

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain “forward-looking” statements within the meaning of 

Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. “Forward-looking” 

statements are any statements that are not based on historical information. Statements other than statements of historical facts included in this report, 

including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of 

management for future operations, are “forward-looking” statements. Forward-looking statements generally can be identified by the use of forwardlooking terminology such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” or “continue” or the negative of such 

words or variations of such words and similar expressions. These statements are not guarantees of future performance and involve certain risks, 

uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or 

forecasted in such forward-looking statements and we can give no assurance that such forward-looking statements will prove to be correct. Important 

factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, or “cautionary 

statements,” include, but are not limited to: 

• our ability to timely build and/or open facilities as planned, profitably manage such facilities and successfully integrate such facilities into 

our operations without substantial additional costs; 

• our ability to fulfill our debt service obligations and its impact on our liquidity; 

• our ability to estimate the government’s level of utilization of public-private partnerships for correctional services and the impact of any 

modifications or reductions by our government customers of their utilization of public-private partnerships; 

• our ability to accurately project the size and growth of public-private partnerships for correctional services in the U.S. and internationally 

and our ability to capitalize on opportunities for public-private partnerships; 

• our ability to successfully respond to any challenges or concerns that our government customers may raise regarding their use of publicprivate partnerships for correctional services; 

• our ability to successfully respond to delays encountered by states pursuing public-private partnerships for correctional services and cost 

savings initiatives implemented by a number of states; 

• our ability to activate the inactive beds at our idle facilities; 

• our ability to maintain or increase occupancy rates at our facilities; 

• our ability to expand, diversify and grow our correctional, detention, reentry, community-based services, youth services, monitoring 

services, evidence-based supervision and treatment programs and secure transportation services businesses; 

• our ability to win management contracts for which we have submitted proposals, retain existing management contracts and meet any 

performance standards required by such management contracts; 

• our ability to control operating costs associated with contract start-ups; 

• our ability to raise new project development capital given the often short-term nature of the customers’ commitment to use newly developed 

facilities; 

• our ability to develop long-term earnings visibility; 

• our ability to identify suitable acquisitions, and to successfully complete and integrate such acquisitions on satisfactory terms, to enhance 

occupancy levels and the financial performance of assets acquired and estimate the synergies to be achieved as a result of such acquisitions; 

• our exposure to the impairment of goodwill and other intangible assets as a result of our acquisitions; 

• our ability to successfully conduct our operations in the United Kingdom, South Africa and Australia through joint ventures or a 

consortium; 

• our ability to obtain future financing on satisfactory terms or at all, including our ability to secure the funding we need to complete ongoing 

capital projects; 

• our exposure to political and economic instability and other risks impacting our international operations; 

• the instability of foreign exchange rates, exposing us to currency risks in Australia, the United Kingdom, and South Africa, or other 

countries in which we may choose to conduct our business; 

• our exposure to risks impacting our information systems, including those that may cause an interruption, delay or failure in the provision of 

our services; 

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• our exposure to rising general insurance costs; 

• an increase in unreimbursed labor rates; 

• our exposure to federal, state and foreign income tax law changes, including changes to the REIT provisions and the recently enacted Tax 

Cuts and Jobs Act and our exposure as a result of federal, state and international examinations of our tax returns or tax positions; 

• our exposure to claims for which we are uninsured; 

• our exposure to rising employee and inmate medical costs; 

• our ability to manage costs and expenses relating to ongoing litigation arising from our operations; 

• our ability to accurately estimate on an annual basis, loss reserves related to general liability, workers compensation and automobile liability 

claims; 

• the ability of our government customers to secure budgetary appropriations to fund their payment obligations to us and continue to operate 

under our existing agreements and/or renew our existing agreements; 

• our ability to pay quarterly dividends consistent with our requirements as a REIT, and expectations as to timing and amounts; 

• our ability to remain qualified for taxation as a real estate investment trust, or REIT; 

• our ability to comply with government regulations and applicable contractual requirements; 

• our ability to acquire, protect or maintain our intellectual property; 

• the risk that a number of factors could adversely affect the market price of our common stock; 

• our ability to fully implement our stock buyback program and the timing and amounts of any future stock repurchases; and 

• other factors contained in our filings with the Securities and Exchange Commission, or the SEC, including, but not limited to, those detailed 

in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2017 and our Current Reports on 

Form 8-K filed with the SEC. 

We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. All 

subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the 

cautionary statements included in this Quarterly Report on Form 10-Q. 

Introduction 

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our 

consolidated results of operations and financial condition. This discussion contains forward-looking statements that involve risks and uncertainties. Our 

actual results may differ materially from those anticipated in these forward-looking statements as a result of numerous factors including, but not limited 

to, those described above under “Forward-Looking Information”, those described below under “Part II – Item 1A. Risk Factors” and under “Part I – 

Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017. The discussion should be read in conjunction with 

our unaudited consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q. 

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We are a real estate investment trust (“REIT”) specializing in the ownership, leasing and management of correctional, detention and reentry facilities 

and the provision of community-based services and youth services in the United States, Australia, South Africa, and the United Kingdom. We own, 

lease and operate a broad range of correctional and detention facilities including maximum, medium and minimum security prisons, immigration 

detention centers, minimum security detention centers, and community-based reentry facilities and we offer an expanded delivery of offender 

rehabilitation services under our ‘GEO Continuum of Care’ platform. We offer counseling, education and/or treatment to inmates with alcohol and drug 

abuse problems at most of the domestic facilities we manage. We are also a provider of innovative compliance technologies, industry-leading 

monitoring services, and evidence-based supervision and treatment programs for community-based parolees, probationers and pretrial defendants. 

At September 30, 2018, our worldwide operations include the management and/or ownership of approximately 96,000 beds at 136 correctional, 

detention and reentry facilities, including idle facilities, projects under development and recently awarded contracts, and also include the provision of 

community supervision services for more than 192,000 offenders and pre-trial defendants, including approximately 100,000 individuals through an 

array of technology products including radio frequency, GPS, and alcohol monitoring devices. 

We provide a diversified scope of services on behalf of our government clients: 

• our correctional and detention management services involve the provision of security, administrative, rehabilitation, education and food 

services, primarily at adult male correctional and detention facilities; 

• our community-based services involve supervision of adult parolees and probationers and the provision of temporary housing, 

programming, employment assistance and other services with the intention of the successful reintegration of residents into the community; 

• our youth services include residential, detention and shelter care and community-based services along with rehabilitative and educational 

programs; 

• our monitoring services provide our governmental clients with innovative compliance technologies, industry-leading monitoring services, 

and evidence-based supervision and treatment programs for community-based parolees, probationers and pretrial defendants; including 

services provided under the Intensive Supervision Appearance Program, which we refer to as ISAP, to the U.S. Immigration and Customs 

Enforcement, which we refer to as ICE, for the provision of services designed to improve the participation of non-detained aliens in the 

immigration court system; 

• we develop new facilities using our project development experience to design, construct and finance what we believe are state-of-the-art 

facilities that maximize security and efficiency; 

• we provide secure transportation services for offender and detainee populations as contracted domestically and internationally – our joint 

venture GEOAmey is responsible for providing prisoner escort and custody services in the United Kingdom, including all of Wales and 

England except London and the East of England; and 

• our services are provided at facilities which we either own, lease or are owned by our customers. 

For the nine months ended September 30, 2018 and September 30, 2017, we had consolidated revenues of $1,732.0 million and $1,694.4 million, 

respectively. We maintained an average company wide facility occupancy rate of 93.2% including 88,480 active beds and excluding 7,068 idle beds 

which includes those being marketed to potential customers for the nine months ended September 30, 2018, and 91.0% including 87,823 active beds and 

excluding 8,272 idle beds which includes those being marketed to potential customers and beds under development for the nine months ended 

September 30, 2017. 

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As a REIT, we are required to distribute annually at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction 

and by excluding net capital gain) and we began paying regular quarterly REIT dividends in 2013. The amount, timing and frequency of future 

dividends, however, will be at the sole discretion of our Board of Directors (the “Board”) and will be declared based upon various factors, many of 

which are beyond our control, including, our financial condition and operating cash flows, the amount required to maintain REIT status, limitations on 

distributions in our existing and future debt instruments, limitations on our ability to fund distributions using cash generated through our taxable REIT 

subsidiaries (“TRSs”) and other factors that our Board may deem relevant. 

During the nine months ended September 30, 2018 and the year ended December 31, 2017, respectively, we declared and paid the following regular 

cash distributions to our shareholders as follows: 

Declaration Date Record Date Payment Date

Distribution

Per Share

Aggregate

Payment

Amount

(in millions)

February 6, 2017 February 17, 2017 February 27, 2017 $ 0.47 $ 52.5

April 25, 2017 May 9, 2017 May 19, 2017 $ 0.47 $ 58.4

July 10, 2017 July 21, 2017 July 28, 2017 $ 0.47 $ 58.3

October 12, 2017 October 23, 2017 October 30, 2017 $ 0.47 $ 58.3

February 5, 2018 February 16, 2018 February 27, 2018 $ 0.47 $ 58.3

April 11, 2018 April 23, 2018 May 3, 2018 $ 0.47 $ 57.4

July 10, 2018 July 20, 2018 July 27, 2018 $ 0.47 $ 57.2

On October 15, 2018, the Board declared a quarterly cash dividend of $0.47 per share of common stock which was paid on November 2, 2018 to 

shareholders of record as of the close of business on October 26, 2018. 

Reference is made to Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 26, 2018, for further discussion and analysis of 

information pertaining to our financial condition and results of operations as of and for the fiscal year ended December 31, 2017. 

Fiscal 2018 Developments 

Stock Buyback Program 

On February14, 2018, we announced that our Board of Directors authorized a stock buyback program authorizing us to repurchase up to a maximum of 

$200.0 million of our shares of common stock. The stock buyback program will be funded primarily with cash on hand, free cash flow and borrowings 

under our Revolver. The program is effective through October 20, 2020. The stock buyback program is intended to be implemented through purchases 

made from time to time in the open market or in privately 

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negotiated transactions, in accordance with applicable Securities and Exchange Commission requirements. The stock buyback program does not 

obligate us to purchase any specific amount of our common stock and may be suspended or extended at any time at the discretion of our Board of 

Directors. During the nine months ended September 30, 2018, we purchased 3,117,483 shares of our common stock at a cost of $70.4 million primarily 

purchased with proceeds from our Revolver. We believe that we have the ability to continue to fund the stock buyback program, our debt service 

requirements and our maintenance and growth capital expenditure requirements, while maintaining sufficient liquidity for other corporate purposes. 

Contract Awards/Terminations 

On June 26, 2018, we announced that we have signed a contract with the Idaho Department of Correction for the housing, management and supervision 

of approximately 670 medium-custody inmates at the company-owned Eagle Pass Detention Facility in Eagle Pass, Texas and the company-owned 

Karnes Correctional Center in Karnes City, Texas. The contract will have a term of two years effective October 1, 2018 and is expected to generate 

approximately $17 million in annualized revenues. 

On March 29, 2018, we announced that our transportation joint venture in the United Kingdom, GEO Amey, has signed a contract with Scottish Prison 

Service for the provision of court custody and prisoner escort services in Scotland. The contract will have a base term of eight years effective 

January 26, 2019 with a renewal option of four years and is expected to have an average annual revenue of approximately $39 million. 

With respect to the Parklea Centre in Australia, we were unfortunately unsuccessful during the current competitive rebid process and we expect to 

transition the management contract in March of 2019. Upon transition, due to the requirements under the labor and employment laws in Australia, we 

may incur certain transition costs related to employee compensation and benefits. Any such costs are not expected to be material to our results of 

operations, financial condition or cash flows. 

Effective in April 2018, our contract for the management of the 1,576-bed Allen Correctional Center in Kinder, Louisiana, terminated. 

Idle Facilities 

As of September 30, 2018, we are marketing approximately 4,700 vacant beds at four of our idle facilities to potential customers. The carrying values of 

these idle facilities totaled approximately $124.1 million as of September 30, 2018, excluding equipment and other assets that can be easily transferred 

for use at other facilities. 

Critical Accounting Policies 

The accompanying unaudited consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United 

States. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information 

available. These estimates and assumptions affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported 

amounts of revenue and expenses during the reporting period. We routinely evaluate our estimates based on historical experience and on various other 

assumptions that management 

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believes are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. During the 

nine months ended September 30, 2018, we did not experience any significant changes in estimates or judgments inherent in the preparation of our 

consolidated financial statements. A summary of our significant accounting policies is contained in Note 1 to our consolidated financial statements 

included in our Annual Report on Form 10-K for the year ended December 31, 2017. With respect to the adoption of ASC Topic 606, “Revenue from 

Contracts with Customers” on January 1, 2018, refer to Note 2 – Revenue Recognition of the Notes to Unaudited Consolidated Financial Statements 

included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional disclosures related to our revenue recognition policies. 

RESULTS OF OPERATIONS 

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and the notes to our unaudited 

consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q. 

Comparison of Third Quarter 2018 and Third Quarter 2017 

Revenues 

2018 % of Revenue 2017 % of Revenue $ Change % Change

(Dollars in thousands)

U.S. Corrections & Detention $379,351 65.0% $365,071 64.3% $ 14,280 3.9% 

GEO Care 141,808 24.3% 134,610 23.8% 7,198 5.3% 

International Services 62,371 10.7% 45,641 8.1% 16,730 36.7% 

Facility Construction & Design — — % 21,437 3.8% (21,437) (100.0)% 

Total $583,530 100.0% $566,759 100.0% $ 16,771 3.0% 

U.S. Corrections & Detention 

Revenues increased in Third Quarter 2018 compared to Third Quarter 2017 primarily due to aggregate increases of $16.8 million due to aggregate net 

increases in population with our federal clients, transportation services and/or rates. We also had increases of $1.6 million resulting from the activation 

of our contracts at our company-owned Eagle Pass Detention Facility in Eagle Pass, Texas and our company-owned Montgomery Processing Center in 

Conroe, Texas. These increases were partially offset by net decreases of $4.1 million at certain of our facilities due to contract terminations. 

The number of compensated mandays in U.S. Corrections & Detention facilities was approximately 5.8 million in Third Quarter 2018 and 5.7 million in 

Third Quarter 2017. We experienced an aggregate net increase of approximately 100,000 mandays as a result of population increases with our federal 

clients and our contract activations discussed above, offset by contract terminations. We look at the average occupancy in our facilities to determine 

how we are managing our available beds. The average occupancy is calculated by taking compensated mandays as a percentage of capacity. The average 

occupancy in our U.S. Corrections & Detention facilities was 96.0% and 93.0% of capacity in the Third Quarter 2018 and Third Quarter 2017, 

respectively, excluding idle facilities. 

GEO Care 

Revenues increased in Third Quarter 2018 compared to Third Quarter 2017 primarily due to aggregate increases of $12.5 million primarily due to 

increases in average client and participant counts under our ISAP and electronic monitoring services as well as census levels at certain of our 

community-based and reentry centers. These increases were partially offset by $5.3 million related to contract terminations/closures of underutilized 

facilities. 

International Services 

Revenues for International Services in Third Quarter 2018 compared to Third Quarter 2017 increased by $16.7 million. We experienced a net increase 

of $21.4 million in performance which was primarily attributable to our Australian subsidiary’s Ravenhall correctional facility project which began 

operations during the fourth quarter of 2017. Additionally, we had a decrease due to foreign exchange rate fluctuations of $4.7 million resulting from the 

strengthening of the U.S. dollar against certain international currencies. 

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Facility Construction & Design 

Revenues for our Facility Construction & Design services during Third Quarter 2017 relate to the design and construction activity for our Ravenhall 

correctional facility contract with the Department of Justice in the State of Victoria, Australia which was completed during the fourth quarter of 2017. 

Operating Expenses 

2018

% of Segment

Revenues 2017

% of Segment

Revenues $ Change % Change

(Dollars in thousands)

U.S. Corrections & Detention $282,332 74.4% $268,718 73.6% $ 13,614 5.1% 

GEO Care 94,169 66.4% 90,949 67.6% 3,220 3.5% 

International Services 58,305 93.5% 41,752 91.5% 16,553 39.6% 

Facility Construction & Design — — % 21,715 101.3% (21,715) (100.0)% 

Total $434,806 74.5% $423,134 74.7% $ 11,672 2.8% 

Operating expenses consist of those expenses incurred in the operation and management of our correctional, detention and community-based facilities. 

U.S. Corrections & Detention 

Operating expenses for U.S. Corrections & Detention increased by $13.6 million in Third Quarter 2018 compared to Third Quarter 2017. The increase 

was primarily due to aggregate net increases in population, transportation services and the variable costs associated with those services of $12.2 million. 

We also experienced increases of $5.1 million resulting from the activation of our contracts at our company-owned Eagle Pass Detention Facility in 

Eagle Pass, Texas and our company-owned Montgomery Processing Center in Conroe, Texas. These increases were partially offset by decreases of 

$3.7 million at certain of our facilities primarily due to contract terminations. 

GEO Care 

Operating expenses for GEO Care increased by $3.2 million during Third Quarter 2018 from Third Quarter 2017 primarily due to $4.5 million of 

increases in average client and participant counts under our ISAP and electronic monitoring services. These increases were partially offset by decreases 

of $1.3 million due to net decreases in census levels at certain of our community-based and reentry centers as well as contract terminations/closures of 

underutilized facilities. 

International Services 

Operating expenses for International Services in Third Quarter 2018 compared to Third Quarter 2017 increased by $16.6 million. We experienced a net 

increase of $20.3 million primarily attributable to our Australian subsidiary’s Ravenhall correctional facility project which began operations during the 

fourth quarter of 2017. Additionally, we had a decrease due to foreign exchange rate fluctuations of $3.7 million resulting from the strengthening of the 

U.S. dollar against certain international currencies. 

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Facility Construction & Design 

Operating expenses for our Facility Construction & Design services during Third Quarter 2017 relate to the design and construction activity for our 

Ravenhall correctional facility contract with the Department of Justice in the State of Victoria, Australia which was completed during the fourth quarter 

of 2017. 

Depreciation and Amortization 

2018

% of Segment

Revenue 2017

% of Segment

Revenue $ Change % Change

(Dollars in thousands)

U.S. Corrections & Detention $19,134 5.0% $18,802 5.2% $ 332 1.8% 

GEO Care 11,680 8.2% 12,368 9.2% (688) (5.6)% 

International Services 483 0.8% 479 1.0% 4 0.8% 

Total $31,297 5.4% $31,649 5.6% $ (352) (1.1)% 

U.S. Corrections & Detention 

U.S. Corrections & Detention depreciation and amortization expense increased slightly in Third Quarter 2018 compared to Third Quarter 2017 primarily 

due to net increases related to assets written off related to contract terminations at certain of our facilities. 

GEO Care 

GEO Care depreciation and amortization expense decreased in Third Quarter 2018 compared to Third Quarter 2017 primarily due to certain assets 

becoming fully depreciated and/or amortized. These decreases were partially offset by assets written off related to contract terminations at certain of our 

facilities. 

International Services 

Depreciation and amortization expense remained relatively consistent in Third Quarter 2018 compared to Third Quarter 2017 as a result of certain assets 

becoming fully depreciated and there were no significant expansions or renovations during 2017 or 2018 at our international subsidiaries. 

Other Unallocated Operating Expenses 

2018

% of

Revenue 2017

% of

Revenue $ Change % Change

(Dollars in thousands)

General and Administrative Expenses $47,647 8.2% $49,074 9.0% $ (1,427) (2.9)% 

General and administrative expenses comprise substantially all of our other unallocated operating expenses which primarily includes corporate 

management salaries and benefits, professional fees and other administrative expenses. General and administrative expenses decreased in Third Quarter 

2018 compared to Third Quarter 2017. The decrease is primarily due to merger and acquisition related expenses of $5.0 million incurred in Third 

Quarter 2017 related to our acquisition of CEC. This decrease was partially offset by increases related to higher non-cash stock-based compensation 

expense of $0.6 million as well as normal personnel and compensation adjustments, professional, consulting, business development and other 

administrative expenses in the aggregate of $3.0 million. 

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Non Operating Expenses 

Interest Income and Interest Expense 

2018

% of

Revenue 2017

% of

Revenue $ Change % Change

(Dollars in thousands)

Interest Income $ 8,428 1.4% $14,648 2.6% $ (6,220) (42.5)% 

Interest Expense $37,991 6.5% $38,719 6.8% $ (728) (1.9)% 

Interest income decreased in the Third Quarter 2018 compared to Third Quarter 2017 primarily due to a lower balance on our contract receivable related 

to our correctional facility project in Ravenhall, Australia. When the facility was completed during the fourth quarter 2017, the State of Victoria made a 

principal payment towards the balance of approximately $224 million. 

Interest expense decreased slightly in Third Quarter 2018 compared to Third Quarter 2017 primarily due to less construction loan interest related to our 

correctional facility project in Ravenhall, Australia due to a lower loan balance compared to the prior period. Upon completion of the facility in fourth 

quarter 2017, the State of Victoria made a payment towards the loan balance of approximately $224 million. Also contributing to the decrease was the 

effect of Amendment No. 1 to Third Amended and Restated Credit Agreement executed on April 30, 2018 which reduced the interest rate on our term 

loans from LIBOR plus 2.5% to LIBOR plus 2.00%. Partially offsetting these decreases were additional interest incurred on higher debt balances 

resulting from our acquisition of CEC on April 5, 2017. Refer to Note 12- Debt of the Notes to Unaudited Consolidated Financial Statements included 

in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion. 

Income Tax Provision 

2018 Effective Rate 2017 Effective Rate $ Change % Change

(Dollars in thousands)

Income Taxes $3,723 9.3% $1,720 4.4% $ 2,003 116.5% 

The provision for income taxes during Third Quarter 2018 increased compared to Third Quarter 2017 along with the effective tax rate. The increase is 

primarily due to a change in the composition of our income. In Third Quarter 2018 more income was earned by our taxable REIT subsidiaries, which are 

fully subject to tax and which increased our effective tax rate. This increase was partially offset by favorable non-recurring items. As a REIT, we are 

required to distribute at least 90% of our taxable income to shareholders and in turn are allowed a deduction for the distribution at the REIT level. Our 

wholly-owned taxable REIT subsidiaries continue to be fully subject to federal, state and foreign income taxes, as applicable. We estimate our annual 

effective tax rate to be in the range of approximately 10% to 12% exclusive of any discrete items. 

Equity in Earnings of Affiliates, net of Income Tax Provision 

2018

% of

Revenue 2017

% of

Revenue $ Change % Change

(Dollars in thousands)

Equity in Earnings of Affiliates $2,735 0.5% $1,342 0.2% $ 1,393 103.8% 

Equity in earnings of affiliates, presented net of income taxes, represents the earnings of SACS and GEOAmey in the aggregate. Equity in earnings of 

affiliates during Third Quarter 2018 compared to Third Quarter 2017 increased primarily due to interest income received related to favorable tax 

settlements at SACS. 

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Comparison of Nine Months 2018 and Nine Months 2017 

Revenues 

2018 % of Revenue 2017 % of Revenue $ Change % Change

(Dollars in thousands)

U.S. Corrections & Detention $1,107,016 63.9% $1,073,840 63.4% $ 33,176 3.1% 

GEO Care 431,819 24.9% 377,740 22.3% 54,079 14.3% 

International Services 193,121 11.2% 130,261 7.7% 62,860 48.3% 

Facility Construction & Design — — % 112,602 6.6% (112,602) (100.0)% 

Total $1,731,956 100.0% $1,694,443 100.0% $ 37,513 2.2% 

U.S. Corrections & Detention 

Revenues increased in Nine Months 2018 compared to Nine Months 2017 by $33.2 million primarily due to aggregate net increases of $46.0 million due 

to our acquisition of CEC on April 5, 2017 and net increases in population with our federal clients, transportation services and/or rates. We also had 

increases of $1.6 million resulting from the activation of our contracts at our company-owned Eagle Pass Detention Facility in Eagle Pass, Texas and 

our company-owned Montgomery Processing Center in Conroe, Texas. These increases were partially offset by net decreases of $14.4 million at certain 

of our facilities primarily due to contract terminations. 

The number of compensated mandays in U.S. Corrections & Detention facilities was approximately 17.1 million in Nine Months 2018 and 16.6 million 

in Nine Months 2017. We experienced an aggregate net increase of approximately 500,000 mandays primarily as a result of our acquisition of CEC, 

activation of new contracts and net increases in population with our federal clients discussed above. We look at the average occupancy in our facilities 

to determine how we are managing our available beds. The average occupancy is calculated by taking compensated mandays as a percentage of 

capacity. The average occupancy in our U.S. Corrections & Detention facilities was 95.1% and 93.3% of capacity in the Nine Months 2018 and Nine 

Months 2017, respectively, excluding idle facilities. 

GEO Care 

Revenues increased in Nine Months 2018 compared to Nine Months 2017 primarily due to aggregate increases of $40.2 million from our acquisition of 

CEC on April 5, 2017. We also experienced increases of $21.0 million primarily due to increases in average client and participant counts under our 

ISAP and electronic monitoring services. These increases were partially offset by $7.1 million related to net decreases in census levels at certain of our 

community-based and reentry centers as well as contract terminations/closures of underutilized facilities. 

International Services 

Revenues for International Services in Nine Months 2018 compared to Nine Months 2017 increased by $62.9 million. We experienced a net increase of 

$64.0 million in performance which was primarily attributable to our Australian subsidiary’s Ravenhall correctional facility project which began 

operations during the fourth quarter of 2017. Additionally, we had a decrease due to foreign exchange rate fluctuations of $1.1 million resulting from the 

strengthening of the U.S. dollar against certain international currencies. 

Facility Construction & Design 

Revenues for our Facility Construction & Design services during Nine Months 2017 relate to the design and construction activity for our Ravenhall 

correctional facility contract with the Department of Justice in the State of Victoria, Australia which was completed during the fourth quarter of 2017. 

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Operating Expenses 

2018

% of Segment

Revenues 2017

% of Segment

Revenues $ Change % Change

(Dollars in thousands)

U.S. Corrections & Detention $ 825,475 74.6% $ 792,727 73.8% $ 32,748 4.1% 

GEO Care 293,299 67.9% 248,934 65.9% 44,365 17.8% 

International Services 180,538 93.5% 120,403 92.4% 60,135 49.9% 

Facility Construction & Design — — % 114,222 101.4% (114,222) (100.0)% 

Total $1,299,312 75.0% $1,276,286 75.3% $ 23,026 1.8% 

Operating expenses consist of those expenses incurred in the operation and management of our correctional, detention and community-based facilities. 

U.S. Corrections & Detention 

Operating expenses for U.S. Corrections & Detention increased by $32.7 million in Nine Months 2018 compared to Nine Months 2017. The increase 

was primarily due to our acquisition of CEC on April 5, 2017 and aggregate net increases in population, transportation services and the variable costs 

associated with those services of $41.9 million. We also experienced increases of $5.3 million resulting from the activation of our contracts at our 

company-owned Eagle Pass Detention Facility in Eagle Pass, Texas and our company-owned Montgomery Processing Center in Conroe, Texas.These 

increases were partially offset by decreases of $14.5 million at certain of our facilities due to contract terminations. 

GEO Care 

Operating expenses for GEO Care increased by $44.4 million during Nine Months 2018 from Nine Months 2017 primarily due to our acquisition of 

CEC on April 5, 2017 resulting in an increase to operating expenses of $45.9 million. We also experienced net increases of $8.3 million due to increases 

in average client and participant counts under our ISAP and electronic monitoring services and program growth at our community-based and reentry 

centers. These increases were partially offset by $9.8 million of net decreases in census levels at certain of our community-based and reentry centers and 

the associated variable costs as well as contract terminations/closures of underutilized facilities. Operating expenses as a percentage of revenues have 

increased during Nine Months 2018 which is primarily related to our acquisition of CEC. 

International Services 

Operating expenses for International Services in Nine Months 2018 compared to Nine Months 2017 increased by $60.1 million. We experienced a net 

increase of $61.0 million primarily attributable to our Australian subsidiary’s Ravenhall correctional facility project which began operations during the 

fourth quarter of 2017. Additionally, we had a decrease due to foreign exchange rate fluctuations of $0.9 million resulting from the strengthening of the 

U.S. dollar against certain international currencies. 

Facility Construction & Design 

Operating expenses for our Facility Construction & Design services during Nine Months 2017 relate to the design and construction activity for our 

Ravenhall correctional facility contract with the Department of Justice in the State of Victoria, Australia which was completed during the fourth quarter 

of 2017. 

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Depreciation and Amortization 

2018

% of Segment

Revenue 2017

% of Segment

Revenue $ Change % Change

(Dollars in thousands)

U.S. Corrections & Detention $57,155 5.2% $56,275 5.2% $ 880 1.6% 

GEO Care 35,725 8.3% 34,744 9.2% 981 2.8% 

International Services 1,656 0.9% 1,445 1.1% 211 14.6% 

Total $94,536 5.5% $92,464 5.5% $ 2,072 2.2% 

U.S. Corrections & Detention 

U.S. Corrections & Detention depreciation and amortization expense increased slightly in Nine Months 2018 compared to Nine Months 2017 primarily 

due to renovations made at several of our facilities and new facilities and intangible assets acquired in our acquisition of CEC on April 5, 2017. 

GEO Care 

GEO Care depreciation and amortization expense increased slightly in Nine Months 2018 compared to Nine Months 2017 primarily due to new facilities 

and intangible assets acquired in our acquisition of CEC on April 5, 2017. 

International Services 

Depreciation and amortization expense increased in Nine Months 2018 compared to Nine Months 2017 primarily as a result of additions in connection 

with the activation of our Ravenhall facility in fourth quarter 2017. 

Other Unallocated Operating Expenses 

2018

% of

Revenue 2017

% of

Revenue $ Change % Change

(Dollars in thousands)

General and Administrative Expenses $136,927 7.9% $143,866 8.5% $ (6,939) (4.8)% 

General and administrative expenses comprise substantially all of our other unallocated operating expenses which primarily includes corporate 

management salaries and benefits, professional fees and other administrative expenses. General and administrative expenses decreased in Nine Months 

2018 compared to Nine Months 2017. The decrease is primarily due to merger and acquisition expenses of $17.9 million incurred in Nine Months 2017 

related to our acquisition of CEC. This decrease was partially offset by increases in legal related expenses of $4.5 million incurred in Nine Months 2018, 

higher non-cash stock-based compensation expense of $1.9 million and normal personnel and compensation adjustments, professional, consulting, 

business development and other administrative expenses in the aggregate of $4.6 million. 

Non Operating Expenses 

Interest Income and Interest Expense 

2018

% of

Revenue 2017

% of

Revenue $ Change % Change

(Dollars in thousands)

Interest Income $ 26,194 1.5% $ 38,971 2.3% $(12,777) (32.8)% 

Interest Expense $110,779 6.4% $109,702 6.5% $ 1,077 1.0% 

Interest income decreased in the Nine Months 2018 compared to Nine Months 2017 primarily due to a lower balance on our contract receivable related 

to our correctional facility project in Ravenhall, Australia. When the facility was completed during the fourth quarter 2017, the State of Victoria made a 

principal payment towards the balance of approximately $224 million. 

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Interest expense increased in Nine Months 2018 compared to Nine Months 2017 primarily due to additional interest incurred on higher debt balances 

resulting from our acquisition of CEC on April 5, 2017. Partially offsetting the increase was less construction loan interest related to our correctional 

project in Ravenhall, Australia due to a lower loan balance compared to the prior period. Upon completion of the facility in fourth quarter 2017, the 

State of Victoria made a payment towards the loan balance of approximately $224 million. Also partially offsetting the increase was the effect of 

Amendment No. 1 to Third Amended and Restated Credit Agreement executed on April 30, 2018 which reduced the interest rate on the term loans from 

LIBOR plus 2.5% to LIBOR plus 2.00%. Refer to Note 12- Debt of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 

of this Quarterly Report on Form 10-Q for further discussion. 

Income Tax Provision 

2018 Effective Rate 2017 Effective Rate $ Change % Change

(Dollars in thousands)

Income Taxes $12,193 10.5% $5,590 5.0% $ 6,603 118.1% 

The provision for income taxes during Nine Months 2018 increased compared to Nine Months 2017 along with the effective tax rate which is primarily 

due to a change in the composition of our income. In Nine Months 2018 more income was earned by our taxable REIT subsidiaries, which are fully 

subject to tax. In addition, in Nine Months 2017, there was a tax benefit on the merger and acquisition expenses of $17.9 million related to our 

acquisition of CEC which had the effect of lowering total taxes paid and favorably impacting the effective tax rate. Furthermore, related to our stock 

compensation that vested during Nine Months 2018, there was a $1.1 million discrete tax expense, whereas in the Nine Months 2017 there was a 

$1.5 million discrete tax benefit. These discrete items are the result of the adoption of ASU No. 2016-09, Compensation – Stock Compensation (Topic 

718) in 2017. As a REIT, we are required to distribute at least 90% of our taxable income to shareholders and in turn are allowed a deduction for the 

distribution at the REIT level. Our wholly-owned taxable REIT subsidiaries continue to be fully subject to federal, state and foreign income taxes, as 

applicable. We estimate our annual effective tax rate to be in the range of approximately 10% to 12% exclusive of any discrete items. 

Equity in Earnings of Affiliates, net of Income Tax Provision 

2018

% of

Revenue 2017

% of

Revenue $ Change % Change

(Dollars in thousands)

Equity in Earnings of Affiliates $7,071 0.4% $4,255 0.3% $ 2,816 66.2% 

Equity in earnings of affiliates, presented net of income taxes, represents the earnings of SACS and GEOAmey in the aggregate. Equity in earnings of 

affiliates during Nine Months 2018 compared to Nine Months 2017 increased primarily due to interest income received related to favorable tax 

settlements at SACS. 

Financial Condition 

Capital Requirements 

Our current cash requirements consist of amounts needed for working capital, distributions of our REIT taxable income in order to maintain our REIT 

qualification, debt service, supply purchases, investments in joint ventures, and capital expenditures related to either the development of new 

correctional, detention and reentry facilities, or the maintenance of existing facilities. In addition, 

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some of our management contracts require us to make substantial initial expenditures of cash in connection with opening or renovating a facility. 

Generally, these initial expenditures are subsequently fully or partially recoverable as pass-through costs or are billable as a component of the per diem 

rates or monthly fixed fees to the contracting agency over the original term of the contract. In connection with GEOAmey, our joint venture in the 

United Kingdom, we and our joint venture partner have each provided a line of credit of £12 million, or $15.6 million, based on exchange rates as of 

September 30, 2018, for GEOAmey’s operations. As of September 30, 2018, $1.7 million was outstanding to each of the joint venture partners. In 

October 2018, the note receivable to each joint venture partner was paid off in full. 

We currently have contractual commitments for a number of projects using Company financing. We estimate that the cost of these existing capital 

projects will be approximately $229.4 million of which $188.7 million was spent through September 30, 2018. We estimate that the remaining capital 

requirements related to these capital projects will be $40.7 million which will be spent through 2019. 

Liquidity and Capital Resources 

Indebtedness 

On April 30, 2018, we entered into Amendment No. 1 to Third Amended and Restated Credit Agreement (the “Credit Agreement”) by and among the 

Refinancing Lenders party thereto, the other lenders party thereto, GEO and GEO Corrections Holdings, Inc. and BNP Paribas, as Administrative 

Agent. The amendment, among other things, provides for the refinancing of all of GEO’s existing senior secured term loans with refinancing term loans 

in the aggregate principal amount of $792.0 million and makes certain other modifications to GEO’s senior secured credit agreement. The interest rate 

applicable to the refinancing term loans is equal to LIBOR plus 2.00% (with a LIBOR floor of 0.75%). The amendment was considered to be a 

modification and loan costs of approximately $1 million were incurred and capitalized in connection with the transaction. 

The Credit Agreement evidences a credit facility (the “Credit Facility”) consisting of a $792.0 million term loan (the “Term Loan”) bearing interest at 

LIBOR plus 2.00% (with a LIBOR floor of 0.75%), and a $900.0 million Revolver initially bearing interest at LIBOR plus 2.25% (with no LIBOR 

floor) together with AUD275 million under the Australian LC Facility. As of September 30, 2018, there were no letters of credit issued under the 

Australian LC Facility. Amounts to be borrowed by GEO under the Credit Agreement are subject to the satisfaction of customary conditions to 

borrowing. The Term Loan component is scheduled to mature on March 23, 2024. The revolving credit commitment component is scheduled to mature 

on May 19, 2021. The Credit Agreement also has an accordion feature of $450.0 million, subject to lender demand and prevailing market conditions and 

satisfying the relevant borrowing conditions. 

The Credit Agreement contains certain customary representations and warranties, and certain customary covenants that restrict our ability to, among 

other things (i) create, incur or assume any indebtedness, (ii) create, incur, assume or permit liens, (iii) make loans and investments, (iv) engage in 

mergers, acquisitions and asset sales, (v) make certain restricted payments, (vi) issue, sell or otherwise dispose of capital stock, (vii) engage in 

transactions with affiliates, (viii) allow the total leverage ratio to exceed 6.25 to 1.00, allow the senior secured leverage ratio to exceed 3.50 to 1.00, or 

allow the interest coverage ratio to be less than 3.00 to 1.00, (ix) cancel, forgive, make any voluntary or optional payment or prepayment on, or redeem 

or acquire for value any senior notes, except as permitted, (x) alter the business we conduct, and (xi) materially impair our lenders’ security interests in 

the collateral for its loans. 

Events of default under the Credit Agreement include, but are not limited to, (i) our failure to pay principal or interest when due, (ii) our material breach 

of any representation or warranty, (iii) covenant defaults, (iv) liquidation, reorganization or other relief relating to bankruptcy or insolvency, (v) cross 

default under certain other material indebtedness, (vi) unsatisfied final judgments over a specified threshold, (vii) certain material environmental 

liability claims which have been asserted against us, and (viii) a change in control. 

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All of the obligations under the Credit Agreement are unconditionally guaranteed by certain domestic subsidiaries of GEO and the Credit Agreement 

and the related guarantees are secured by a perfected first-priority pledge of substantially all of our present and future tangible and intangible domestic 

assets and all present and future tangible and intangible domestic assets of each guarantor, including but not limited to a first-priority pledge of all of the 

outstanding capital stock owned by us and each guarantor in our domestic subsidiaries. 

GEO Australasia Holdings Pty Ltd, GEO Australasia Finance Holdings Pty Ltd as trustee for the GEO Australasia Finance Holding Trust, and together 

with GEO Australasia Holdings, collectively (“the Australian Borrowers”) are wholly owned foreign subsidiaries of GEO. We have designated each of 

the Australian Borrowers as restricted subsidiaries under the Credit Agreement. However, the Australian Borrowers are not obligated to pay or perform 

any obligations under the Credit Agreement other than their own obligations as Australian Borrowers under the Credit Agreement. The Australian 

Borrowers do not pledge any of their assets to secure any obligations under the Credit Agreement. 

On August 18, 2016, we executed a Letter of Offer by and among GEO and HSBC Bank Australia Limited (the “Letter of Offer”) providing for a bank 

guarantee line and bank guarantee/standby sub-facility in an aggregate amount of AUD100 million, or $72.2 million, based on exchange rates in effect 

as of September 30, 2018 (collectively, the “Bank Guarantee Facility”). The Bank Guarantee Facility allows us to provide letters of credit to assure 

performance of certain obligations of our wholly owned subsidiary relating to our correctional facility in Ravenhall, located near Melbourne, Australia. 

The Bank Guarantee Facility is unsecured. The issuance of letters of credit under the Bank Guarantee Facility is subject to the satisfaction of the 

conditions precedent specified in the Letter of Offer. Letters of credit issued under the bank guarantee lines are due on demand and letters of credit 

issued under the bank guarantee/standby sub-facility cannot have a duration exceeding twelve months. The Bank Guarantee Facility may be terminated 

by HSBC Bank Australia Limited on 90 days written notice. As of September 30, 2018, there was AUD100 million, or $72.2 million based on exchange 

rates at September 30, 2018, in letters of credit issued under the Bank Guarantee Facility. 

As of September 30, 2018, we had approximately $788 million in aggregate borrowings outstanding, net of discount, under the Term Loan and 

approximately $456 million in borrowings under the Revolver, and approximately $70 million in letters of credit which left approximately $374 million 

in additional borrowing capacity under the Revolver. Refer to Note 12—Debt of the Notes to Unaudited Consolidated Financial Statements included in 

Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion. 

On April 18, 2016, we completed an offering of $350.0 million aggregate principal amount of 6.00% Senior Notes due 2026. The notes will mature on 

April 15, 2026 and have a coupon rate and yield to maturity of 6.00%. Interest is payable semi-annually in cash in arrears on April 15 and October 15 of 

each year. The proceeds were used to fund the tender offer and the redemption of all of our 6.625% Senior Notes due 2021, to pay all related fees, costs 

and expenses and for general corporate purposes including repaying borrowings under our Revolver. Refer to Note 12 – Debt of the Notes to Unaudited 

Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion. 

On September 25, 2014, we completed an offering of $250.0 million aggregate principal amount of 5.875% Senior Notes due 2024. The notes will 

mature on October 15, 2024 and have a coupon rate and yield to maturity of 5.875%. Interest is payable semi-annually in cash in arrears on April 15 and 

October 15, which commenced on April 15, 2015. The proceeds received from the 5.875% Senior Notes due 2024 were used to pay down outstanding 

borrowings under our Revolver and pay related fees, costs and expenses. Refer to Note 12 – Debt of the Notes to Unaudited Consolidated Financial 

Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion. 

In connection with a design and build correctional facility project agreement in Ravenhall, Australia with the State of Victoria, in September 2014, we 

entered into a syndicated facility agreement (the “Construction Facility”) with National Australia Bank Limited to provide debt financing for 

construction of the project. The project was completed during the fourth quarter of 2017. The Construction Facility provided for non-recourse funding 

up to AUD 791.0 million, or approximately $571.5 million, based on exchange rates as of September 30, 2018. Construction draws were funded 

throughout the project according to a fixed utilization schedule as defined in the Construction Facility. The term of the Construction Facility is through 

September 2019 and bears interest at a variable rate quoted by certain Australian banks plus 200 basis points. We have begun negotiations for a 

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refinancing transaction and anticipate completion of the refinancing transaction in the first quarter of 2019. As we currently do not yet have a financing 

agreement in place, the balance has been presented as current in the accompanying consolidated balance sheet as of September 30, 2018 included in Part 

I, Item 1 of this Quarterly Report on Form 10-Q. In accordance with the terms of the Construction Facility, upon completion and commercial acceptance 

of the correctional facility in fourth quarter 2017, in accordance with the contract, the State made a lump sum payment of AUD 310 million, or 

approximately $224 million, based on exchange rates as of September 30, 2018, towards a portion of the outstanding principal. The remaining 

outstanding principal balance will be repaid over the term of the operating agreement. As of September 30, 2018, approximately $328 million was 

outstanding under the Construction Facility. Refer to Note 12 – Debt of the Notes to Unaudited Consolidated Financial Statements included in Part I, 

Item 1 of this Quarterly Report on Form 10-Q for further discussion. 

On October 3, 2013, we completed an offering of $250.0 million aggregate principal amount of 5.875% Senior Notes due 2022. The 5.875% Senior 

Notes due 2022 will mature on January 15, 2022 and have a coupon rate and yield to maturity of 5.875%. Interest is payable semi-annually on 

January 15 and July 15 each year, which commenced on January 15, 2014. The proceeds received from the 5.875% Senior Notes due 2022 were used, 

together with cash on hand, to fund the repurchase, redemption or other discharge of our 7.75% senior notes due 2017 and to pay related transaction fees 

and expenses. Refer to Note 12 – Debt of the Notes to Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report 

on Form 10-Q for further discussion. 

On March 19, 2013, we completed an offering of $300.0 million aggregate principal amount of 5.125% Senior Notes. The 5.125% Senior Notes will 

mature on April 1, 2023 and have a coupon rate and yield to maturity of 5.125%. Interest is payable semi-annually on April 1 and October 1 each year, 

which commenced on October 1, 2013. A portion of the proceeds received from the 5.125% Senior Notes were used to repay the prior revolver credit 

draws outstanding under the prior senior credit facility. Refer to Note 12 – Debt of the Notes to Unaudited Consolidated Financial Statements included 

in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion. 

In addition to the debt outstanding under the Credit Facility, the 6.00% Senior Notes, the 5.125% Senior Notes, the 5.875.% Senior Notes due 2022 and 

the 5.875% Senior Notes due 2024 discussed above, we also have significant debt obligations which, although these obligations are non-recourse to us, 

require cash expenditures for debt service. Our significant debt obligations could have material consequences. See “Risk Factors-Risks Related to Our 

High Level of Indebtedness” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017. We are exposed to various 

commitments and contingencies which may have a material adverse effect on our liquidity. We also have guaranteed certain obligations for certain of 

our international subsidiaries. These non-recourse obligations, commitments and contingencies and guarantees are further discussed in our Annual 

Report on Form 10-K for the year ended December 31, 2017. 

We consider opportunities for future business and/or asset acquisitions as we deem appropriate when market conditions present opportunities. If we are 

successful in our pursuit of any new projects, our cash on hand, cash flows from operations and borrowings under the existing Credit Facility may not 

provide sufficient liquidity to meet our capital needs and we could be forced to seek additional financing or refinance our existing indebtedness. There 

can be no assurance that any such financing or refinancing would be available to us on terms equal to or more favorable than our current financing 

terms, or at all. In the future, our access to capital and ability to compete for future capital intensive projects will also be dependent upon, among other 

things, our ability to meet certain financial covenants in the indenture governing the 5.125% Senior Notes, the indenture governing the 5.875% Senior 

Notes due 2022, the indenture governing the 5.875% Senior Notes due 2024, the indenture governing the 6.00% Senior Notes due 2026 and our Credit 

Agreement. A substantial decline in our financial performance could limit our access to capital pursuant to these covenants and have a material adverse 

affect on our liquidity and capital resources and, as a result, on our financial condition and results of operations. In addition to these foregoing potential 

constraints on our capital, a number of state government agencies have been suffering from budget deficits and liquidity issues. While we expect to be in 

compliance with our debt covenants, if these constraints were to intensify, our liquidity could be materially adversely impacted as could our ability to 

remain in compliance with these debt covenants. 

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As a REIT, we are subject to a number of organizational and operational requirements, including a requirement that we annually distribute to our 

shareholders an amount equal to at least 90% of our REIT taxable income (determined before the deduction for dividends paid and by excluding any net 

capital gain). Generally, we expect to distribute all or substantially all of our REIT taxable income so as not to be subject to the income or excise tax on 

undistributed REIT taxable income. The amount, timing and frequency of distributions will be at the sole discretion of our Board and will be based upon 

various factors. 

We plan to fund all of our capital needs, including distributions of our REIT taxable income in order to maintain our REIT qualification, and capital 

expenditures, from cash on hand, cash from operations, borrowings under our Credit Facility and any other financings which our management and 

Board, in their discretion, may consummate. Currently, our primary source of liquidity to meet these requirements is cash flow from operations and 

borrowings under the $900.0 million Revolver. Our management believes that cash on hand, cash flows from operations and availability under our 

Credit Facility will be adequate to support our capital requirements for 2018 and 2019 as disclosed under “Capital Requirements” above. 

Stock Buyback Program 

On February 14, 2018, we announced that our Board of Directors authorized a stock buyback program authorizing us to repurchase up to a maximum of 

$200.0 million of our shares of common stock. The stock buyback program will be funded primarily with cash on hand, free cash flow and borrowings 

under our Revolver. The program is effective through October 20, 2020. The stock buyback program is intended to be implemented through purchases 

made from time to time in the open market or in privately negotiated transactions, in accordance with applicable Securities and Exchange Commission 

requirements. The stock buyback program does not obligate us to purchase any specific amount of our common stock and may be suspended or 

extended at any time at the discretion of our Board of Directors. During the nine months ended September 30, 2018, we purchased 3,117,483 shares of 

our common stock at a cost of $70.4 million primarily purchased with proceeds from our Revolver. We believe that we have the ability to continue to 

fund the stock buyback program, our debt service requirements and our maintenance and growth capital expenditure requirements, while maintaining 

sufficient liquidity for other corporate purposes. 

Automatic Shelf Registration on Form S-3 

On October 20, 2017, we filed an automatic shelf registration statement on Form S-3 with the Securities and Exchange Commission. The shelf 

registration statement is automatically effective and is valid for three years. Pursuant to the shelf registration statement, we may offer common stock, 

preferred stock, debt securities, guarantees of debt securities, warrants and units from time to time in amounts, at prices and on terms that will be 

determined at the time of any such offering. On November 9, 2017, in connection with the shelf registration, we filed with the SEC a prospectus 

supplement related to the offer and sale from time to time of our common stock at an aggregate offering price of up to $150 million through sales 

agents. Sales of shares of our common stock under the prospectus supplement and the equity distribution agreements entered into with the sales agents, 

if any, may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities 

Act of 1933. There were no shares of common stock sold under this prospectus supplement during the nine months ended September 30, 2018. 

Executive Retirement Agreement 

We have a non-qualified deferred compensation agreement with our Chief Executive Officer (“CEO”). The current agreement, as amended, provides for 

a lump sum payment upon retirement, no sooner than age 55. Our CEO has reached age 55 and is eligible to receive the payment upon retirement. If our 

CEO had retired as of September 30, 2018, we would have had to pay him approximately $8.3 million. Based on our current capitalization, we do not 

believe that making this payment would materially adversely impact our liquidity. 

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Off-Balance Sheet Arrangements 

Except as discussed above, and in the notes to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this quarterly report on 

Form 10-Q, we do not have any off-balance sheet arrangements. 

Cash Flow 

Cash, cash equivalents and restricted cash and cash equivalents as of September 30, 2018 was $126.7 million, compared to $133.5 million as of 

December 31, 2017. 

Operating Activities 

Cash provided by operating activities amounted to $220.2 million for the nine months ended September 30, 2018 versus cash provided by operating 

activities of $57.9 million for the nine months ended September 30, 2017. Cash provided by operating activities during the nine months ended 

September 30, 2018 was positively impacted by net income attributable to GEO, non-cash expenses such as depreciation and amortization, amortization 

of debt issuance costs, and stock-based compensation expense. Equity in earnings of affiliates negatively impacted cash. Changes in accounts 

receivable, prepaid expenses and other assets increased in total by $14.0 million, representing a negative impact on cash. The increase was primarily 

driven by the timing of billings and collections. Changes in accounts payable, accrued expenses and other liabilities increased by $3.0 million which 

positively impacted cash. The increase was primarily driven by the timing of payments. Additionally, cash provided by operating activities for the nine 

months ended September 30, 2018 was negatively impacted by an increase in changes in contract receivable related to our correctional facility in 

Ravenhall, Australia of $3.4 million which was a result of the timing of interest accruals and payments made towards the contract receivable. 

Cash provided by operating activities amounted to $57.9 million for the nine months ended September 30, 2017. Cash provided by operating activities 

during the nine months ended September 30, 2017 was positively impacted by net income attributable to GEO, non-cash expenses such as depreciation 

and amortization, amortization of debt issuance costs, and stock-based compensation expense. Equity in earnings of affiliates negatively impacted cash. 

Changes in accounts receivable, prepaid expenses and other assets decreased in total by $5.6 million, representing a positive impact on cash. The 

decrease was primarily driven by the timing of billings and collections. Changes in accounts payable, accrued expenses and other liabilities decreased by 

$18.3 million which negatively impacted cash. The decrease was primarily driven by the timing of payments. 

Additionally, cash provided by operating activities for the nine months ended September 30, 2017 was negatively impacted by an increase in changes in 

contract receivable of $163.1 million. This increase relates to costs incurred and estimated earnings in excess of billings related to our correctional 

facility in Ravenhall, Australia. The contract receivable was expected to grow as construction services were performed. In accordance with the contract, 

the project would not be billed out until completion and commercial acceptance of the facility by the State. The facility was completed and accepted by 

the State during the fourth quarter of 2017. 

Investing Activities 

Cash used in investing activities of $152.0 million during the nine months ended September 30, 2018 was primarily the result of capital expenditures of 

$161.5 million. Cash used in investing activities of $460.6 million during the nine months ended September 30, 2017 was primarily the result of capital 

expenditures of $104.1 million and our acquisition of CEC, net of cash acquired of $353.6 million. 

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Financing Activities 

Cash used in financing activities during the nine months ended September 30, 2018 was approximately $69.6 million compared to cash provided by 

financing activities of $387.0 million during the nine months ended September 30, 2017. Cash used in financing activities during the nine months ended 

September 30, 2018 was primarily the result of dividends paid of $172.3 million, payments for repurchases of common stock of $70.4 million, payments 

on long-term debt of $186.0 million and payments on non-recourse debt of $9.6 million. These decreases were partially offset by proceeds from longterm debt of $372.0 million. Cash provided by financing activities during the nine months ended September 30, 2017 was primarily the result of 

proceeds from long-term debt of $1,324.9 million which included proceeds received from our Term Loan which was modified on March 23, 2017. 

Additionally, we had proceeds from non-recourse debt of $123.8 million related to construction draws for our correctional facility in Ravenhall, 

Australia and proceeds from the issuance of common stock under our prospectus supplement of $275.9 million. These increases were partially offset by 

a decrease for dividends paid of $169.2 million, payments on long-term debt of $1,093.1 million and payments on non-recourse debt of $68.9 million. 

Non-GAAP Measures 

Funds from Operations (“FFO”) is a widely accepted supplemental non-GAAP measure utilized to evaluate the operating performance of real estate 

investment trusts. It is defined in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT, 

which defines FFO as net income (loss) attributable to common shareholders (computed in accordance with Generally Accepted Accounting Principles), 

excluding real estate related depreciation and amortization, excluding gains and losses from the cumulative effects of accounting changes, extraordinary 

items and sales of properties, and including adjustments for unconsolidated partnerships and joint ventures. 

We also present Normalized Funds From Operations, or Normalized FFO, and Adjusted Funds from Operations, or AFFO, supplemental non-GAAP 

financial measures of real estate investment trusts’ operating performances. 

Normalized FFO is defined as FFO adjusted for certain items which by their nature are not comparable from period to period or that tend to obscure the 

Company’s actual operating performance, including for the periods presented mergers and acquisitions (“M&A”) related expenses, pre-tax, loss on 

extinguishment of debt, start-up expenses, pre-tax, legal related expenses, pre-tax, CEC escrow releases, pre-tax, the Net Tax Cuts and Jobs Act impact 

and the tax effect of those adjustments. 

AFFO is defined as Normalized FFO adjusted by adding non-cash expenses such as non-real estate related depreciation and amortization, stock based 

compensation expense, the amortization of debt issuance costs, discount and/or premium and other non-cash interest, and by subtracting recurring 

consolidated maintenance capital expenditures. 

Because of the unique design, structure and use of our correctional facilities, we believe that assessing the performance of our correctional facilities 

without the impact of depreciation or amortization is useful and meaningful to investors. Although NAREIT has published its definition of FFO, 

companies often modify this definition as they seek to provide financial measures that meaningfully reflect their distinctive operations. We have 

modified FFO to derive Normalized FFO and AFFO that meaningfully reflect our operations. Our assessment of our operations is focused on long-term 

sustainability. The adjustments we make to derive the non-GAAP measures of Normalized FFO and AFFO exclude items which may cause short-term 

fluctuations in net income attributable to GEO but have no impact on our cash flows, or we do not consider them to be fundamental attributes or the 

primary drivers of our business plan and they do not affect our overall long-term operating performance. We may make adjustments to FFO from time 

to time for certain other income and expenses that do not reflect a necessary component of our operational performance on the basis discussed above, 

even though such items may require cash settlement. Because FFO, Normalized FFO and AFFO exclude depreciation and amortization unique to real 

estate as well as non-operational items and certain other charges that are highly variable from year to year, they provide our investors with performance 

measures that reflect the impact to operations from trends in occupancy rates, per diem rates, operating costs and interest costs, providing a perspective 

not immediately apparent from net income attributable to GEO. 

We believe the presentation of FFO, Normalized FFO and AFFO provide useful information to investors as they provide an indication of our ability to 

fund capital expenditures and expand our business. FFO, Normalized FFO and AFFO provide disclosure on the same basis as that used by 

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our management and provide consistency in our financial reporting, facilitate internal and external comparisons of our historical operating performance 

and our business units and provide continuity to investors for comparability purposes. Additionally, FFO, Normalized FFO and AFFO are widely 

recognized measures in our industry as a real estate investment trust. 

Our reconciliation of net income attributable to The GEO Group, Inc. to FFO, Normalized FFO and AFFO for the three and nine months ended 

September 30, 2018 and 2017 is as follows (in thousands): 

Three Months Ended Nine Months Ended

September 30,

2018

September 30,

2017

September 30,

2018

September 30,

2017

Net income attributable to The GEO Group, Inc. $ 39,289 $ 38,489 $ 111,697 $ 109,884

Add (Subtract):

Real estate related depreciation and amortization 17,634 16,782 52,531 48,718

Gain (loss) on sale of real estate assets * 2,209 — 2,701 (261) 

NAREIT Defined FFO $ 59,132 $ 55,271 $ 166,929 $ 158,341

Add (Subtract):

Net Tax Cuts and Jobs Impact — — 304 — 

Start-up expenses, pre-tax 3,728 — 3,826 — 

Legal related expenses, pre-tax — — 4,500 — 

CEC escrow releases, pre-tax — — (2,273) — 

M&A related expenses, pre-tax — 4,974 — 17,930

Loss on extinguishment of debt — — 574 — 

Tax effect of adjustments to Funds From Operations ** 74 (1,430) (639) (3,953) 

Normalized Funds from Operations $ 62,934 $ 58,815 $ 173,221 $ 172,318

Add (Subtract):

Non-real estate related depreciation and amortization 13,663 14,867 42,005 43,746

Consolidated maintenance capital expenditures (6,162) (5,822) (17,561) (17,179) 

Stock-based compensation expense 5,564 4,859 16,351 14,852

Amortization of debt issuance costs, discount and/or premium and other 

non-cash interest 1,868 4,246 5,860 11,922

Adjusted Funds from Operations $ 77,867 $ 76,965 $ 219,876 $ 225,659

* No tax impact 

** Tax effect of adjustments relate to M&A related expenses, legal related expenses, start-up expenses and CEC escrow releases 

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Outlook 

The following discussion contains statements that are not historical statements and, therefore, constitute forward-looking statements within the meaning 

of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements are subject to risks and uncertainties that could cause actual 

results to differ materially from those stated or implied in the forward-looking statements. Please refer to “Part I – Item 1A. Risk Factors” and the 

“Forward Looking Statements – Safe Harbor” sections in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as well as the 

“Forward-Looking Statements – Safe Harbor” section and other disclosures contained in this Form 10-Q for further discussion on forward-looking 

statements and the risks and other factors that could prevent us from achieving our goals and cause the assumptions underlying the forward-looking 

statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements. 

Revenue 

We continue to be encouraged by the current landscape of growth opportunities; however any positive trends may, to some extent, be adversely 

impacted by government budgetary constraints or any changes to a government’s willingness to maintain or grow public-private partnerships in the 

future. While state finances overall are stable, future budgetary pressures may cause state correctional agencies to pursue a number of cost savings 

initiatives which may include reductions in per diem rates and/or the scope of services provided by private operators. These potential cost savings 

initiatives could have a material adverse impact on our current operations and/or our ability to pursue new business opportunities. Additionally, if state 

budgetary constraints, as discussed above, persist or intensify, our state customers’ ability to pay us may be impaired and/or we may be forced to 

renegotiate our management contracts on less favorable terms and our financial condition, results of operations or cash flows could be materially 

adversely impacted. We plan to actively bid on any new projects that fit our target profile for profitability and operational risk. Although we are pleased 

with the overall industry outlook, positive trends in the industry may be offset by several factors, including budgetary constraints, contract 

modifications, contract terminations, contract non-renewals, and/or contract re-bids and the impact of any other potential changes to the willingness to 

maintain or grow public-private partnerships on the part of other government agencies. We believe we have a strong relationship with our government 

partners and we believe that we operate facilities that maximize security and efficiency while offering our suite of GEO Continuum of Care services and 

resources. 

Although we have historically had a relatively high contract renewal rate, there can be no assurance that we will be able to renew our expiring 

management contracts on favorable terms, or at all. Also, while we are pleased with our track record in re-bid situations, we cannot assure that we will 

prevail in any such future situations. 

Internationally, we are exploring a number of opportunities in our current markets and will continue to actively bid on any opportunities that fit our 

target profile for profitability and operational risk. In September 2014, we announced that a consortium led by us and comprised of The GEO Group 

Australia Pty. Ltd., John Holland Construction and Honeywell signed a contract with the Department of Justice in the State of Victoria for the 

development and operation of a 1,300-bed capacity correctional facility in Ravenhall, Australia. The Ravenhall facility was developed under a publicprivate partnership financing structure with a capital contribution from us, which was made in January 2017, of approximately AUD 115 million, or 

$83.1 million, based on exchange rates as of September 30, 2018, and we anticipate returns on investment consistent with our company-owned facilities. 

The project was completed during the fourth quarter of 2017 and is now operational. On March 29, 2018, we announced that our transportation joint 

venture in the United Kingdom, GEO Amey, has signed a contract with Scottish Prison Service for the provision of court custody and prisoner escort 

services in Scotland. The contract will have a base term of eight years effective January 26, 2019 with a renewal option of four years and is expected to 

have an average annual revenue of approximately $39 million. With respect to the Parklea Center in Australia, we were unfortunately unsuccessful 

during the current competitive rebid process and will be transitioning the management contract in March of 2019. 

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With respect to our reentry services, electronic monitoring services, and youth services business conducted through our GEO Care business segment, we 

are currently pursuing a number of business development opportunities. Relative to opportunities for community-based reentry services, we are working 

with our existing federal, state, and local correctional clients to leverage new opportunities for both residential reentry facilities as well as 

non-residential day reporting centers. We continue to expend resources on informing federal, state and local governments about the benefits of publicprivate partnerships, and we anticipate that there will be new opportunities in the future as those efforts continue to yield results. We believe we are well 

positioned to capitalize on any suitable opportunities that become available in this area. 

Operating Expenses 

Operating expenses consist of those expenses incurred in the operation and management of our contracts to provide services to our governmental clients. 

Labor and related costs represented 58.5% of our operating expenses during the nine months ended September 30, 2018. Additional significant 

operating expenses include food, utilities and inmate medical costs. During the nine months ended September 30, 2018, operating expenses totaled 

75.0% of our consolidated revenues. Our operating expenses as a percentage of revenues in 2018 will be impacted by the opening of any new or existing 

idle facilities as a result of the cost of transitioning and/or start-up operations related to a facility opening. During 2018, we will incur carrying costs for 

facilities that are currently vacant. As of September 30, 2018, our worldwide operations include the management and/or ownership of approximately 

96,000 beds at 136 correctional and detention facilities, including idle facilities, projects under development and recently awarded contracts, and also 

include the provision of community supervision services for more than 192,000 offenders and pretrial defendants, including approximately 100,000 

individuals through an array of technology products including radio frequency, GPS, and alcohol monitoring devices. 

General and Administrative Expenses 

General and administrative expenses consist primarily of corporate management salaries and benefits, professional fees and other administrative 

expenses. During the nine months ended September 30, 2018, general and administrative expenses totaled 7.9% of our consolidated revenues. We 

expect general and administrative expenses as a percentage of revenues in 2018 to remain consistent or decrease as a result of cost savings initiatives. 

We expect business development costs to remain consistent or increase slightly as we pursue additional business development opportunities in all of our 

business lines. We also plan to continue expending resources from time to time on the evaluation of potential acquisition targets. 

Idle Facilities 

As of September 30, 2018, we are marketing approximately 4,700 vacant beds at four of our U.S. Corrections & Detention idle facilities to potential 

customers. The annual carrying cost of our idle facilities in 2018 is estimated to be $17.6 million, including depreciation expense of $4.0 million. As of 

September 30, 2018, these facilities had a net book value of $124.1 million. We currently do not have any firm commitment or agreement in place to 

activate these facilities. Historically, some facilities have been idle for multiple years before they received a new contract award. These idle facilities are 

included in the U.S. Corrections & Detention segment. The per diem rates that we charge our clients often vary by contract across our portfolio. 

However, if all of these idle facilities were to be activated using our U.S. Corrections & Detention average per diem rate in 2018 (calculated as the U.S. 

Corrections & Detention revenue divided by the number of U.S. Corrections & Detention mandays) and based on the average occupancy rate in our U.S. 

Corrections & Detention facilities through September 30, 2018, we would expect to receive incremental annualized revenue of approximately 

$105 million and an annualized increase in earnings per share of approximately $0.15 to $0.20 per share based on our average U.S. Corrections and 

Detention operating margin. 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 

Interest Rate Risk 

We are exposed to market risks related to changes in interest rates with respect to our Credit Facility. Payments under the Credit Facility are indexed to 

a variable interest rate. Based on borrowings outstanding under the Credit Facility of approximately $1,244 million and approximately $70 million in 

outstanding letters of credit, as of September 30, 2018, for every one percent increase in the average interest rate applicable to the Credit Facility, our 

total annual interest expense would increase by approximately $12 million. 

We have entered into certain interest rate swap arrangements for hedging purposes, fixing the interest rates on our Australian non-recourse debt related 

to our Ravenhall Project to 4.2% during the operating phase. The difference between the floating rate and the swap rate on these instruments is 

recognized in interest expense within the respective entity. Because the interest rates with respect to these instruments are fixed, a hypothetical one 

percent change in the current interest rate would not have a material impact on our financial condition or results of operations. 

Additionally, we invest our cash in a variety of short-term financial instruments to provide a return. These instruments generally consist of highly liquid 

investments with original maturities at the date of purchase of three months or less. While these instruments are subject to interest rate risk, a 

hypothetical 100 basis point increase or decrease in market interest rates would not have a material impact on our financial condition or results of 

operations. 

Foreign Currency Exchange Rate Risk 

We are also exposed to market risks related to fluctuations in foreign currency exchange rates between the U.S. dollar, and the Australian dollar, the 

South African Rand and the British Pound currency exchange rates. Based upon our foreign currency exchange rate exposure at September 30, 2018, 

every 10 percent change in historical currency rates would have approximately a $4.6 million effect on our financial position and approximately a 

$1 million impact on our results of operations during the nine months ended September 30, 2018. 

ITEM 4. CONTROLS AND PROCEDURES. 

Evaluation of Disclosure Controls and Procedures. 

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure 

controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, referred to 

as the Exchange Act), as of the end of the period covered by this report. On the basis of this review, our management, including our Chief Executive 

Officer and our Chief Financial Officer, has concluded that as of the end of the period covered by this report, our disclosure controls and procedures 

were effective to give reasonable assurance that the information required to be disclosed in our reports filed with the SEC, under the Exchange Act is 

recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and to ensure that the information 

required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our 

Chief Executive Officer and our Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure. 

It should be noted that the effectiveness of our system of disclosure controls and procedures is subject to certain limitations inherent in any system of 

disclosure controls and procedures, including the exercise of judgment in designing, implementing and evaluating the controls and procedures, the 

assumptions used in identifying the likelihood of future events, and the inability to eliminate misconduct completely. Accordingly, there can be no 

assurance that our disclosure controls and procedures will detect all errors or fraud. As a result, by its nature, our system of disclosure controls and 

procedures can provide only reasonable assurance regarding management’s control objectives. 

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Changes in Internal Control Over Financial Reporting. 

Our management is responsible to report any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 

15d-15(f) under the Exchange Act) during the period to which this report relates that have materially affected, or are reasonably likely to materially 

affect, our internal control over financial reporting. Management believes that there have not been any changes in our internal control over financial 

reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period to which this report relates that have 

materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We implemented internal controls to 

ensure we adequately evaluated our contracts and properly assessed the impact of the new accounting standard related to revenue recognition on our 

financial statements, including relevant disclosures, to facilitate its adoption on January 1, 2018. There were no significant changes to our internal 

control over financial reporting due to the adoption of this standard. 

PART II – OTHER INFORMATION 

ITEM 1. LEGAL PROCEEDINGS. 

The information required herein is incorporated by reference from Note 13 – Commitments, Contingencies and Other in the Notes to the Unaudited 

Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. 

ITEM 1A. RISK FACTORS. 

Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2017 includes a detailed discussion of the risk factors that could 

materially affect our business, financial condition or future prospects. There have been no material changes to our risk factors. 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 

Period

Total Number of

Shares Purchased (1)

Average Price

Paid per Share

Total Number of

Shares Purchased

as Part of Publicly

Announced

Plans or Programs

Approximate Dollar

Value of Shares that

May Yet Be

Purchased Under

the Plans or Programs

(in millions) (2)

July 1, 2018 – July 31, 2018 1,213 $ 25.52 — $ 129.6

August 1, 2018 – August 31, 2018 1,189 $ 25.17 — $ 129.6

September 1, 2018 – September 30, 2018 — $ — — $ 129.6

Total 2,402 — 

(1) The Company withheld 2,402 shares through net share settlements to satisfy minimum statutory tax withholding requirements upon vesting of 

shares of restricted stock held by employees. These purchases were not made as part of a publicly announced plan or program. 

(2) On February 14, 2018, we announced that our Board of Directors authorized a stock buyback program authorizing us to repurchase up to 

$200.0 million of our shares of common stock. The program is effective through October 20, 2020. There were no shares of our common stock 

repurchased during the three months ended September 30, 2018. 

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 

Not applicable. 

ITEM 4. MINE SAFETY DISCLOSURES 

Not applicable. 

ITEM 5. OTHER INFORMATION. 

Not applicable. 

ITEM 6. EXHIBITS. 

(A) Exhibits 

 3.1 Amendment to the Second Amended and Restated Bylaws of The GEO Group, Inc., effective July 6, 2018 (incorporated by reference to 

Exhibit 3.1 to the Company’s report on Form 8-K filed on July 11, 2018). 

 3.2 Amendment to the Second Amended and Restated Bylaws of The GEO Group, Inc., effective September 10, 2018 (incorporated by 

reference to Exhibit 3.1 to the Company’s report on Form 8-K filed on September 13, 2018). 

 31.1 SECTION 302 CEO Certification. 

 31.2 SECTION 302 CFO Certification. 

 32.1 SECTION 906 CEO Certification. 

 32.2 SECTION 906 CFO Certification. 

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation Linkbase

101.DEF XBRL Taxonomy Extension Definition Linkbase

101.LAB XBRL Taxonomy Extension Label Linkbase

101.PRE XBRL Taxonomy Extension Presentation Linkbase

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SIGNATURES 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the 

undersigned thereunto duly authorized. 

THE GEO GROUP, INC.

Date: November 8, 2018 /s/ Brian R. Evans

Brian R. Evans

Senior Vice President & Chief Financial Officer

(duly authorized officer and principal financial officer)

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