Discontinued Operations

12 Months Ended

Dec. 31, 2014

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

Divestiture of RTS

On December 31, 2012, as part of the Company’s restructuring steps allowing it to begin operating as a REIT beginning January 1, 2013, the Company completed the divestiture of its RTS operating component, which was purchased by GEO Care LLC, an entity owned by certain current and former members of GEO's management team (the “MBO Group”). Cash proceeds from the divestiture amounted to $33.3 million. Certain members of the MBO group sold 295,959 shares of common stock back to the Company for a total price of $8.6 million which was used to fund a portion of the purchase price. All provisional purchase price adjustments that had a one year period from the transaction date have expired as of December 31, 2014.

In connection with the RTS divestiture, the Company and GEO Care LLC entered into a services agreement pursuant to which the Company provides accounting support, information systems services, legal support services, risk management services, property management and design services and office space for a five-year term in return for an annual fee (the “Services Agreement”). The Company and GEO Care LLC also executed a license agreement pursuant to which the Company granted to GEO Care LLC an exclusive license for a five-year term to use the GEO Care service mark and domain name in connection with the RTS business in return for an annual fee (the “License Agreement”). The Services Agreement and License Agreement could be terminated by GEO Care LLC at any time by paying a lump sum amount in cash equal to all remaining payments that would be required to be made to the Company under the agreements during the five-year term, discounted to present value using a discount rate of 10%. On February 28, 2014, GEO Care Holdings LLC, the Company's formerly wholly owned subsidiary exercised its right to terminate the Services Agreement and License Agreement with GEO. As a result, GEO Care LLC made a lump sum payment to the Company in the amount of $6.5 million which represented all remaining payments that would have been required to be made to GEO under the agreements, discounted to present value using a discount rate of 10%. Pursuant to the termination, the terms under the Service Agreement will remain in effect until June 30, 2015 and the License Agreement remained in effect until January 1, 2015. Effective January 1, 2015, GEO regained ownership of the GEO Care service mark and domain name. The amount of the termination payment, which is recorded as deferred revenue and included in other current and non-current liabilities in the accompanying consolidated balance sheet, will be amortized through the remaining terms of the termination agreements.

During the years ended December 31, 2014 and 2013, the Company earned fees under the above noted Services Agreement and License Agreement amounting to an aggregate of $4.6 million and $2.0 million, respectively, which has been recorded as an offset to operating expenses in the accompanying Consolidated Statements of Operations.

The disposal of RTS resulted in a loss in the overall customer relationship as no future significant cash flows will be generated for the Company by RTS and the Company will have no continuing involvement with RTS. The operating results of RTS and the loss on disposal have been classified in discontinued operations. Revenues related to the discontinued operations of RTS through its respective disposition date were $167.2 million for the fiscal year ended December 31, 2012.

U.S. Corrections & Detention

On April 19, 2012, the Company announced its discontinuation of its managed-only contract with the State of Mississippi Department of Corrections ("MDOC") 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 all other management contracts with the MDOC, including its managed-only contracts 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.

Revenues related to the discontinued operations of MDOC through their respective disposition dates were $24.5 million and $44.9 million for the fiscal year ended December 31, 2012.

The loss of all management contracts with MDOC resulted in a loss in the overall customer relationship with MDOC as no future significant cash flows will be generated and the Company will have no continuing involvement with MDOC. As such, the results are classified in discontinued operations in accordance with our critical accounting policy on discontinued operations.

Summarized financial information for discontinued operations included in the accompanying Consolidated Statements of Operations is as follows:

			Year Ended
			(in thousands)
	2014		2013			2012
Discontinued Operations:
Income from discontinued operations - RTS	$	—	$	—		$	10,117
Loss from discontinued operations - Mississippi	—		(2,265		)	(3,881		)
Loss on disposition of RTS	—		—			(24,701		)
Income tax benefit	—		—			(7,805		)
Net loss from discontinued operations, net of taxes	$	—	$	(2,265	)	$	(10,660	)

Loss from discontinued operations during the year ended December 31, 2013 represents a charge of $2.3 million of insurance liability claims which are directly related to MDOC.

All losses from the above noted discontinued operations included in the Consolidated Statements of Operations is attributable to GEO.