Condensed Consolidating Financial Information

9 Months Ended

Sep. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Condensed Consolidating Financial Information

CONDENSED CONSOLIDATING FINANCIAL INFORMATION

As of September 30, 2016, 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.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(dollars in thousands)

(unaudited)

	For the Three Months Ended September 30, 2016
	The GEO Group, Inc.			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	173,920		$	410,329		$	112,708		$	(142,581	)	$	554,376
Operating expenses	144,748			314,009			99,483			(142,581		)	415,659
Depreciation and amortization	6,339			21,502			942			—			28,783
General and administrative expenses	11,727			18,180			7,576			—			37,483
Operating income	11,106			56,638			4,707			—			72,451
Interest income	4,765			422			8,029			(5,288		)	7,928
Interest expense	(16,324		)	(13,525		)	(8,867		)	5,288			(33,428		)
Loss on extinguishment of debt	—			—			—			—			—
Income (loss) before income taxes and equity in earnings of affiliates	(453		)	43,535			3,869			—			46,951
Income tax provision	(9		)	4,032			947			—			4,970
Equity in earnings of affiliates, net of income tax provision	—			—			1,693			—			1,693
Income before equity in income of consolidated subsidiaries	(444		)	39,503			4,615			—			43,674
Income from consolidated subsidiaries, net of income tax provision	44,118			—			—			(44,118		)	—
Net income	43,674			39,503			4,615			(44,118		)	43,674
Net loss attributable to noncontrolling interests	—			—			46			—			46
Net income attributable to The GEO Group, Inc.	$	43,674		$	39,503		$	4,661		$	(44,118	)	$	43,720
Net income	$	43,674		$	39,503		$	4,615		$	(44,118	)	$	43,674
Other comprehensive income, net of tax	—			33			450			—			483
Total comprehensive income	$	43,674		$	39,536		$	5,065		$	(44,118	)	$	44,157
Comprehensive loss attributable to noncontrolling interests	—			—			36			—			36
Comprehensive income attributable to The GEO Group, Inc.	$	43,674		$	39,536		$	5,101		$	(44,118	)	$	44,193

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(dollars in thousands)

(unaudited)

	For the Three Months Ended September 30, 2015
	The GEO Group, Inc.			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	175,353		$	369,004		$	65,388		$	(139,879	)	$	469,866
Operating expenses	142,002			288,303			55,540			(139,879		)	345,966
Depreciation and amortization	6,007			20,002			1,118			—			27,127
General and administrative expenses	12,285			16,876			4,581			—			33,742
Operating income	15,059			43,823			4,149			—			63,031
Interest income	5,820			431			2,870			(6,129		)	2,992
Interest expense	(15,419		)	(14,320		)	(3,704		)	6,129			(27,314		)
Income before income taxes and equity in earnings of affiliates	5,460			29,934			3,315			—			38,709
Income tax provision	—			869			889			—			1,758
Equity in earnings of affiliates, net of income tax provision	—			—			1,340			—			1,340
Income before equity in income of consolidated subsidiaries	5,460			29,065			3,766			—			38,291
Income from consolidated subsidiaries, net of income tax provision	32,831			—			—			(32,831		)	—
Net income	38,291			29,065			3,766			(32,831		)	38,291
Net loss attributable to noncontrolling interests	—			—			21			—			21
Net income attributable to The GEO Group, Inc.	$	38,291		$	29,065		$	3,787		$	(32,831	)	$	38,312
Net income	$	38,291		$	29,065		$	3,766		$	(32,831	)	$	38,291
Other comprehensive income, net of tax	—			43			(6,484		)	—			(6,441		)
Total comprehensive income	$	38,291		$	29,108		$	(2,718	)	$	(32,831	)	$	31,850
Comprehensive loss attributable to noncontrolling interests	—			—			64			—			64
Comprehensive income attributable to The GEO Group, Inc.	$	38,291		$	29,108		$	(2,654	)	$	(32,831	)	$	31,914

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(dollars in thousands)

(unaudited)

	For the Nine Months Ended September 30, 2016
	The GEO Group, Inc.			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	515,971		$	1,215,469		$	306,484		$	(425,013	)	$	1,612,911
Operating expenses	418,261			957,704			270,050			(425,013		)	1,221,002
Depreciation and amortization	18,866			64,159			2,861			—			85,886
General and administrative expenses	34,548			53,396			20,504			—			108,448
Operating income	44,296			140,210			13,069			—			197,575
Interest income	15,646			1,440			18,699			(17,398		)	18,387
Interest expense	(49,031		)	(41,401		)	(20,830		)	17,398			(93,864		)
Loss on extinguishment of debt	(15,885		)	—			—			—			(15,885		)
Income (loss) before income taxes and equity in earnings of affiliates	(4,974		)	100,249			10,938			—			106,213
Income tax (benefit) provision	(101		)	9,323			2,778			—			12,000
Equity in earnings of affiliates, net of income tax provision	—			—			4,943			—			4,943
Income (loss) before equity in income of consolidated subsidiaries	(4,873		)	90,926			13,103			—			99,156
Income from consolidated subsidiaries, net of income tax provision	104,029									(104,029		)	—
Net income	99,156			90,926			13,103			(104,029		)	99,156
Net loss attributable to noncontrolling interests	—			—			123			—			123
Net income attributable to The GEO Group, Inc.	$	99,156		$	90,926		$	13,226		$	(104,029	)	$	99,279
Net income	$	99,156		$	90,926		$	13,103		$	(104,029	)	$	99,156
Other comprehensive income (loss), net of tax	—			98			(3,081		)	—			(2,983		)
Total comprehensive income	$	99,156		$	91,024		$	10,022		$	(104,029	)	$	96,173
Comprehensive loss attributable to noncontrolling interests	—			—			104			—			104
Comprehensive income attributable to The GEO Group, Inc.	$	99,156		$	91,024		$	10,126		$	(104,029	)	$	96,277

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(dollars in thousands)

(unaudited)

	For the Nine Months Ended September 30, 2015
	The GEO Group, Inc.			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues	$	481,102		$	1,076,373		$	191,876		$	(406,170	)	$	1,343,181
Operating expenses	399,557			843,498			160,927			(406,170		)	997,812
Depreciation and amortization	18,592			56,881			3,155			—			78,628
General and administrative expenses	33,657			50,684			13,423			—			97,764
Operating income (loss)	29,296			125,310			14,371			—			168,977
Interest income	17,733			2,510			8,189			(20,499		)	7,933
Interest expense	(45,264		)	(43,700		)	(10,145		)	20,499			(78,610		)
Income (loss) before income taxes and equity in earnings of affiliates	1,765			84,120			12,415			—			98,300
Income tax (benefit) provision	(62		)	4,199			2,817			—			6,954
Equity in earnings of affiliates, net of income tax provision	—			—			3,949			—			3,949
Income (loss) from continuing operations before equity in income of consolidated subsidiaries	1,827			79,921			13,547			—			95,295
Income from consolidated subsidiaries, net of income tax provision	93,468			—			—			(93,468		)	—
Net income	$	95,295		$	79,921		$	13,547		$	(93,468	)	$	95,295
Net loss attributable to noncontrolling interests	—			—			79			—			79
Net income attributable to The GEO Group, Inc.	$	95,295		$	79,921		$	13,626		$	(93,468	)	$	95,374
Net income	$	95,295		$	79,921		$	13,547		$	(93,468	)	$	95,295
Other comprehensive income (loss), net of tax	—			120			(7,435		)	—			(7,315		)
Total comprehensive income	$	95,295		$	80,041		$	6,112		$	(93,468	)	$	87,980
Comprehensive loss attributable to noncontrolling interests	—			—			145			—			145
Comprehensive income attributable to The GEO Group, Inc.	$	95,295		$	80,041		$	6,257		$	(93,468	)	$	88,125

CONDENSED CONSOLIDATING BALANCE SHEET

(dollars in thousands)

(unaudited)

	As of September 30, 2016
	The GEO Group, Inc.		Combined Subsidiary Guarantors		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	5,136	$	—	$	24,987		$	—		$	30,123
Restricted cash and investments	—		—		102,652			—			102,652
Accounts receivable, less allowance for doubtful accounts	133,559		190,585		17,310			—			341,454
Current deferred income tax assets	—		—		—			—			—
Prepaid expenses and other current assets	3,534		21,920		9,352			(1,363		)	33,443
Total current assets	142,229		212,505		154,301			(1,363		)	507,672
Restricted Cash and Investments	162		19,021		5,280			—			24,463
Property and Equipment, Net	737,221		1,087,820		83,012			—			1,908,053
Contract Receivable	—		—		388,729			—			388,729
Intercompany Receivable	1,025,018		119,322		17,924			(1,162,264		)	—
Non-Current Deferred Income Tax Assets	713		11,898		11,543			—			24,154
Goodwill	79		614,941		437			—			615,457
Intangible Assets, Net	—		208,209		761			—			208,970
Investment in Subsidiaries	1,111,728		453,635		2,190			(1,567,553		)	—
Other Non-Current Assets	18,153		105,703		20,984			(79,943		)	64,897
Total Assets	$	3,035,303	$	2,833,054	$	685,161		$	(2,811,123	)	$	3,742,395
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	6,935	$	47,247	$	27,724		$	—		$	81,906
Accrued payroll and related taxes	—		31,464		15,483			—			46,947
Accrued expenses and other current liabilities	50,615		81,013		14,290			(1,534		)	144,384
Current portion of capital lease obligations, long-term debt and non-recourse debt	3,000		1,581		11,057			—			15,638
Total current liabilities	60,550		161,305		68,554			(1,534		)	288,875
Non-Current Deferred Income Tax Liabilities	—		—		—			—			—
Intercompany Payable	110,122		1,025,366		26,776			(1,162,264		)	—
Other Non-Current Liabilities	4,247		142,555		25,051			(79,772		)	92,081
Capital Lease Obligations	—		7,757		—			—			7,757
Long-Term Debt	1,893,980		—		—			—			1,893,980
Non-Recourse Debt	—		—		493,303			—			493,303
Commitments & Contingencies and Other
Shareholders' Equity:
The GEO Group, Inc. Shareholders' Equity	966,404		1,496,071		71,482			(1,567,553		)	966,404
Noncontrolling Interests	—		—		(5		)	—			(5		)
Total Shareholders’ Equity	966,404		1,496,071		71,477			(1,567,553		)	966,399
Total Liabilities and Shareholders' Equity	$	3,035,303	$	2,833,054	$	685,161		$	(2,811,123	)	$	3,742,395

CONDENSED CONSOLIDATING BALANCE SHEET

(dollars in thousands)

	As of December 31, 2015
	The GEO Group, Inc.		Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	37,077	$	—		$	22,561	$	—		$	59,638
Restricted cash and investments	—		—			8,489		—			8,489
Accounts receivable, less allowance for doubtful accounts	131,747		162,538			19,812		—			314,097
Current deferred income tax assets	—		23,120			4,794		—			27,914
Prepaid expenses and other current assets	1,190		17,917			10,310		(1,209		)	28,208
Total current assets	170,014		203,575			65,966		(1,209		)	438,346
Restricted Cash and Investments	138		16,386			3,712		—			20,236
Property and Equipment, Net	746,478		1,088,417			81,491		—			1,916,386
Direct Finance Lease Receivable	—		—			1,826		—			1,826
Contract Receivable	—		—			174,141					174,141
Intercompany Receivable	971,291		86,519			—		(1,057,810		)	—
Non-Current Deferred Income Tax Assets	710		(102		)	6,791		—			7,399
Goodwill	79		614,941			418		—			615,438
Intangible Assets, Net	—		223,426			722		—			224,148
Investment in Subsidiaries	1,106,546		453,636			—		(1,560,182		)	—
Other Non-Current Assets	2,387		116,561			25,486		(80,127		)	64,307
Total Assets	$	2,997,643	$	2,803,359		$	360,553	$	(2,699,328	)	$	3,462,227
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable	$	9,731	$	54,675		$	13,117	$	—		$	77,523
Accrued payroll and related taxes	—		35,516			12,961		—			48,477
Accrued expenses and other current liabilities	43,043		78,510			15,139		(1,209		)	135,483
Current portion of capital lease obligations, long-term debt and non-recourse debt	3,000		1,477			12,664		—			17,141
Total current liabilities	55,774		170,178			53,881		(1,209		)	278,624
Non-Current Deferred Income Tax Liabilities			11,120			351		—			11,471
Intercompany Payable	76,427		967,048			14,335		(1,057,810		)	—
Other Non-Current Liabilities	2,894		143,887			21,040		(80,127		)	87,694
Capital Lease Obligations	—		8,693			—		—			8,693
Long-Term Debt	1,855,810		—			—		—			1,855,810
Non-Recourse Debt	—		—			213,098		—			213,098
Commitments & Contingencies and Other
Shareholders' Equity:
The GEO Group, Inc. Shareholders' Equity	1,006,738		1,502,433			57,749		(1,560,182		)	1,006,738
Noncontrolling Interests	—		—			99		—			99
Total Shareholders’ Equity	1,006,738		1,502,433			57,848		(1,560,182		)	1,006,837
Total Liabilities and Shareholders' Equity	$	2,997,643	$	2,803,359		$	360,553	$	(2,699,328	)	$	3,462,227

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(dollars in thousands)

(unaudited)

	For the Nine Months Ended September 30, 2016
	The GEO Group, Inc.			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Consolidated
Cash Flow from Operating Activities:
Net cash (used in) provided by operating activities	$	99,124		$	57,187		$	(168,069	)	$	(11,758	)
Cash Flow from Investing Activities:
Proceeds from sale of property and equipment	68			—			—			68
Insurance proceeds - damaged property	4,733			—			—			4,733
Change in restricted cash and investments	(24		)	(2,635		)	(95,057		)	(97,716		)
Capital expenditures	(9,879		)	(54,552		)	(3,584		)	(68,015		)
Net cash used in investing activities	(5,102		)	(57,187		)	(98,641		)	(160,930		)
Cash Flow from Financing Activities:
Proceeds from long-term debt	813,077			—			—			813,077
Payments on long-term debt	(775,256		)	—			—			(775,256		)
Payments on non-recourse debt	—			—			(1,878		)	(1,878		)
Proceeds from non-recourse debt	—			—			273,087			273,087
Taxes paid related to net share settlements of equity awards	(2,336		)	—			—			(2,336		)
Proceeds from issuance of common stock in connection with ESPP	—						338			338
Debt issuance costs	(16,980		)	—			(3,510		)	(20,490		)
Tax deficiency related to equity compensation	(844		)	—			—			(844		)
Proceeds from stock options exercised	2,367			—			—			2,367
Cash dividends paid	(145,991		)				—			(145,991		)
Net cash (used in) provided by financing activities	(125,963		)	—			268,037			142,074
Effect of Exchange Rate Changes on Cash and Cash Equivalents	—			—			1,099			1,099
Net (Decrease) Increase in Cash and Cash Equivalents	(31,941		)	—			2,426			(29,515		)
Cash and Cash Equivalents, beginning of period	37,077			—			22,561			59,638
Cash and Cash Equivalents, end of period	$	5,136		$	—		$	24,987		$	30,123

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(dollars in thousands)

(unaudited)

	For the Nine Months Ended September 30, 2015
	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	$	72,063		$	74,464		$	(35,363	)	$	111,164
Cash Flow from Investing Activities:
Acquisition of SoberLink, cash consideration				(24,402		)				(24,402		)
Proceeds from sale of property and equipment	—			49			—			49
Insurance proceeds - damaged property	—			1,270			—			1,270
Acquisition of LCS, net of cash acquired	(307,403		)				—			(307,403		)
Change in restricted cash and investments	101			(1,957		)	(9,280		)	(11,136		)
Capital expenditures	(51,084		)	(47,833		)	(1,927		)	(100,844		)
Net cash used in investing activities	(358,386		)	(72,873		)	(11,207		)	(442,466		)
Cash Flow from Financing Activities:
Taxes paid related to net share settlements of equity awards	(2,748		)	—			—			(2,748		)
Proceeds from long-term debt	642,000			—			—			642,000
Payments on long-term debt	(222,675		)				—			(222,675		)
Payments on non-recourse debt	—			—			(6,366		)	(6,366		)
Proceeds from non-recourse debt	—			—			70,117			70,117
Proceeds from issuance of common stock in connection with ESPP	321			—			—			321
Debt issuance costs				—			(5,217		)	(5,217		)
Tax benefit related to equity compensation	1,252			—			—			1,252
Proceeds from stock options exercised	2,513			—			—			2,513
Cash dividends paid	(138,454		)	—			—			(138,454		)
Net cash provided by financing activities	282,209			—			58,534			340,743
Effect of Exchange Rate Changes on Cash and Cash Equivalents	—			—			(3,647		)	(3,647		)
Net Increase (Decrease) in Cash and Cash Equivalents	(4,114		)	1,591			8,317			5,794
Cash and Cash Equivalents, beginning of period	18,492			782			22,063			41,337
Cash and Cash Equivalents, end of period	$	14,378		$	2,373		$	30,380		$	47,131