Business Segments and Geographic Information

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Business Segments and Geographic Information

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 Community Services segment; the International Services segment; and the Facility Construction & Design segment. The Facility Construction & Design segment did not have any operating activity during the 2013 and 2012 periods presented. The GEO Community Services segment was previously referred to as the GEO Care segment but was renamed concurrent with the divestiture of RTS. The U.S. Corrections and Detention and the GEO Community Services segments have been retroactively reclassified during the three and nine months ended September 30, 2012 for the results of discontinued operations. Refer to Note 8 - Discontinued Operations. In addition, the Company has reclassified the results of its operations in Canada to the International Services segment for all periods presented. Canada's results, which were previously included in the U.S. Corrections & Detention segment, were not significant during 2013 or 2012. 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, 2013		September 30, 2012		September 30, 2013		September 30, 2012
Revenues:
U.S. Corrections & Detention	$	253,414	$	243,955	$	756,229	$	724,665
GEO Community Services	76,879		72,657		225,892		217,682
International Services	49,549		52,504		156,405		157,984
Total revenues	$	379,842	$	369,116	$	1,138,526	$	1,100,331
Operating income:
U.S. Corrections & Detention (1)	$	50,826	$	58,814	$	161,550	$	165,675
GEO Community Services (1)	17,128		16,277		53,387		49,620
International Services	4,097		2,939		9,163		8,888
Operating income from segments	$	72,051	$	78,030	$	224,100	$	224,183

(1) In order to estimate workers' compensation and general liability reserves, the Company engages an independent actuary to make a projection of its annual losses based on its actual claim experience. This analysis is performed annually during the third quarter using historical data. As a result of this analysis, the Company increased its reserves by $4.5 million in its U.S. Corrections & Detention segment, and by $1.7 million in its GEO Community Services segment as of September 30, 2013. Also, as a result of the same analysis, the Company decreased its reserves in its U.S. Corrections & Detention Segment by $0.8 millionand increased its reserves by$1.3 million in its GEO Community Services segment as of September 30, 2012. These charges to expense are included in the Company's operating expense for all periods presented.

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, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Total operating income from segments	$	72,051		$	78,030		$	224,100		$	224,183
Unallocated amounts:
General and Administrative Expenses	(27,222		)	(26,428		)	(86,625		)	(79,143		)
Net Interest Expense	(20,485		)	(18,954		)	(58,580		)	(56,810		)
Loss on Extinguishment of Debt	(1,451		)	(8,462		)	(6,978		)	(8,462		)
Income before income taxes and equity in earnings of affiliates, and discontinued operations	$	22,893		$	24,186		$	71,917		$	79,768

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. Our 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 $1.3 million and $3.8 million in earnings, net of tax, for SACS operations during the three months and nine months ended September 30, 2013, respectively, and $1.4 million and $4.0 million in earnings, net of tax, during the three months and nine months ended September 30, 2012, respectively. SACS earnings are included in equity in earnings of affiliates, net of income tax provision in the accompanying consolidated statements of operations. As of September 30, 2013 and December 31, 2012, the Company’s investment in SACS was $8.7 million and $7.8 million, respectively.

The Company has recorded $0.2 million in earnings and $0.1 million in losses, net of tax, for GEOAmey’s operations during the three months and nine months ended September 30, 2013, respectively, and $0.9 million and $2.3 million in losses, net of tax, during the three months and nine months ended September 30, 2012, respectively. GEOAmey's earnings are included in equity in earnings of affiliates, net of income tax provision, in the accompanying consolidated statements of operations. As of September 30, 2013 and December 31, 2012, the Company’s investment in GEOAmey was $(4.2) million and $(4.1) million, respectively, and represents its share of cumulative reported losses. Losses in excess of the Company's investment have been recognized as the Company has provided certain loans and guarantees to provide financial support to GEOAmey (Refer to Note 11-Debt.)