Commitments and Contingencies

Operating Leases

The Company leases correctional facilities, office space, computers and transportation equipment under non-cancelable operating leases expiring between 2013 and 2050. The future minimum commitments under these leases are as follows:



Fiscal Year	Annual Rental
	(In thousands)
2013	$	33,987
2014	30,643
2015	21,964
2016	15,793
2017	14,493
Thereafter	36,035
	$	152,915

The Company leases its corporate offices, which are located in Boca Raton, Florida, under a lease agreement which was amended in October 2011. The current lease expires in March 2020 and has two 5-year renewal options, which if exercised will result in a maximum term ending in March 2030. In addition, the Company leases office space for its regional offices in Charlotte, North Carolina; San Antonio, Texas; and Los Angeles, California. The Company is also currently leasing office space in Pittsburgh, Pennsylvania and Boulder, Colorado. The Company also leases office space in Sydney, Australia, Sandton, South Africa, and Berkshire, England through its overseas affiliates to support its Australian, South African, and UK operations, respectively. The Company also leases 39 ISAP service centers and 23 nonresidential re-entry centers related to BI. These rental commitments are included in the table above. Certain of these leases contain leasehold improvement incentives, rent holidays, and scheduled rent increases which are included in the Company’s rent expense recognized on a straight-line basis. Minimum rent expense associated with the Company’s leases having initial or remaining non-cancelable lease terms in excess of one year was $34.4 million, $35.9 million and $25.4 million for fiscal years 2012, 2011 and 2010, respectively.

Litigation, Claims and Assessments

On June 22, 2011, a jury verdict for $6.5 million was returned against the Company in a wrongful death action brought by the Personal Representative of the Estate of Ronald Sites, a former inmate at the Company's Lawton Oklahoma Correctional Facility. On August 22, 2011, the court entered judgment against GEO in the amount of $8.4 million, which includes pre judgment interest on the amount of the verdict from January 26, 2007, the date of the filing of the lawsuit, through the date of the jury verdict. The lawsuit, Ronald L. Sites, as the administrator of the Estate of Ronald S. Sites, deceased v. The GEO Group, Inc. was filed on January 28, 2007 in the District Court of Comanche County, State of Oklahoma, Case No. CJ-2007-84. It was alleged that on January 29, 2005, Mr. Sites was harmed by his cellmate as a result of the Company's negligence. The Company disagrees with the judgment and is pursuing an appeal. A supersedeas bond in the amount of $10.0 million was posted on August 29, 2011 by the insurance company of the State of Pennsylvania, one of the Company's insurers. The Company intends to vigorously defend its rights and believes its accrual relative to this judgment is adequate. Under its insurance plan, the Company is responsible for the first $3.0 million of liability. Aside from this amount, which the Company would pay directly from general corporate funds, the Company believes it has insurance coverage for this matter.

In June 2004, the Company received notice of a third-party claim for property damage incurred during 2001 and

2002 at several detention facilities formerly operated by its Australian subsidiary. The claim relates to property damage

caused by detainees at the detention facilities. The notice was given by the Australian government’s insurance provider and

did not specify the amount of damages being sought. In August 2007, a lawsuit (Commonwealth of Australia v.

Australasian Correctional Services PTY, Limited No. SC 656) was filed against the Company in the Supreme Court of the

Australian Capital Territory seeking damages of up to approximately AUD 18.0 million or $18.7 million based on exchange

rates as of December 31, 2012, plus interest. The pre-judgment interest rate in Australia is currently 7.5% per annum. The

Company believes that it has several defenses to the allegations underlying the litigation and the amounts sought and

intends to vigorously defend its rights with respect to this matter. 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 legal counsel in

connection with this matter. The accrued reserve assumes a financial settlement of this litigation which would not require

payment of pre-judgment interest. Although the outcome of this matter cannot be predicted with certainty, based on

information known to date and the Company’s preliminary review of the claim and related reserve for loss, the Company

believes that, if settled unfavorably, this matter could have a material adverse effect on its financial condition, results of

operations or cash flows. The Company is uninsured for any damages or costs that it may incur as a result of this claim,

including the expenses of defending the claim.

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. Except as otherwise disclosed above, 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.

Collective Bargaining Agreements

The Company had approximately 21% of its workforce covered by collective bargaining agreements at December 31, 2012. Collective bargaining agreements with 2% of employees are set to expire in less than one year.

Contract Terminations

On March 31, 2012, the Company's contract for the management of the 130-bed Migrant Operations Center at Guantanamo Bay NAS, Cuba terminated and was transferred to another operator. The termination of this contract did not have a material impact on its financial position, results of operations and/ or cash flows.

On April 19, 2012, the Company announced the discontinuation of its managed-only contract with the State of Mississippi, Department of Corrections for the 1,500-bed East Mississippi Correctional Facility ("East Mississippi") effective July 19, 2012. In connection with the discontinuation of East Mississippi, the Company has also discontinued its managed-only contracts with the State of Mississippi, Department of Corrections for the 1,000-bed Marshall County Correctional Facility effective August 13, 2012, and the 1,450-bed Walnut Grove Youth Correctional Facility effective July 1, 2012. Refer to Note 2- Discontinued Operations for additional information.

The Company is currently marketing approximately 6,000 vacant beds at seven of its idle facilities to potential customers. The carrying values of these idle facilities totaled $240.2 million as of December 31, 2012, excluding equipment and other assets that can be easily transferred for use at other facilities.

Commitments

The Company is currently developing a number of projects using existing Company financing facilities. The Company’s management estimates that these existing capital projects will cost approximately $151.2 million, of which $29.5 million was spent through the end of 2012. The Company estimates the remaining capital requirements related to these capital projects to be approximately $121.7 million, which will be spent through fiscal years 2013 and 2014. Capital expenditures related to facility maintenance costs are expected to be $30.0 million for fiscal year 2013. In addition to these current estimated capital requirements for 2013 and 2014, the Company is currently in the process of bidding on, or evaluating potential bids for the design, construction and management of a number of new projects. In the event that the Company wins bids for these projects and decides to self-finance their construction, its capital requirements in 2013 and/or 2014 could materially increase.