Business Combinations

Soberlink, Inc.

On May 18, 2015, the Company's wholly-owned subsidiary, B.I. Incorporated ("BI") acquired 100% of the outstanding common stock of Soberlink, Inc. ("Soberlink") for cash consideration of $24.4 million. Soberlink is a leading developer and distributor of mobile alcohol monitoring devices and services. The Company financed the acquisition of Soberlink with borrowings under its revolving credit facility. Transaction costs incurred in connection with the acquisition were not significant and have been recorded in general and administrative expenses.

As shown below, the Company recorded $14.2 million of goodwill which is not deductible for tax purposes. The Company believes the acquisition of Soberlink provides strategic benefits and synergies with BI's existing electronic monitoring services. These factors contributed to the goodwill that was recorded upon consummation of the transaction. The goodwill and net assets are included in the GEO Care business segment. Intangible assets consist of technology with an estimated useful life of 8 and a customer relationship with an estimated useful life of 20. The acquired contract in the acquisition of Soberlink is up for renewal on an annual basis.

The purchase price of approximately $24.4 million has been preliminarily allocated to the estimated fair values of the assets acquired and liabilities assumed as of May 18, 2015 as follows (in '000's):



Accounts receivable and other current assets	$	295
Inventory	385
Intangible assets - management contracts	5,500
Intangible assets - technology	9,700
Total assets acquired	15,880
Accounts payable	18
Deferred tax and other tax liabilities	5,670
Total identifiable net assets	10,192
Goodwill	14,210
Total consideration paid	$	24,402

Additionally, the Company has provided a loan in the amount of $2.2 million to an entity ("Soberlink Healthcare, LLC") owned by the former shareholders of Soberlink which is included in Other Non-Current Assets in the accompanying Consolidated Balance Sheet. The loan matures on May 19, 2019 and bears interest annually at 10.00%. Proceeds from the loan were used by the seller to fund certain research and development activities of another entity owned by the former shareholders ("DevCo, LLC"). The Company has also entered into a license and development agreement with DevCo, LLC whereby the Company will pay an annual fee of $1.3 million in exchange for a lifetime, royalty free right to use any improvements to the existing technology resident in the product that Soberlink sells. The Company has determined that it has an implicit variable interest in DevCo, LLC and that DevCo, LLC is a variable interest entity. However, the Company has determined that it is not the primary beneficiary of DevCo, LLC since it does not have the power to direct the activities of DevCo, LLC that most significantly impact DevCo, LLC's economic performance. Nor does the Company have the obligation to absorb the losses of DevCo, LLC. Therefore, the Company does not consolidate this entity. The Company also has determined that Soberlink Healthcare, LLC. is a variable interest entity but the Company is not the primary beneficiary as it does not have the power to direct the activities of Soberlink Healthcare, LLC that most significantly impact its performance. Nor does the Company have the obligation to absorb the losses of Soberlink Healthcare, LLC. Therefore, the Company also does not consolidate this entity.

LCS Corrections Services, Inc.

On February 17, 2015, the Company acquired eight correctional and detention facilities (the “LCS Facilities”) totaling more than 6,500 beds from LCS Corrections Services, Inc., a privately-held owner and operator of correctional and detention facilities in the United States, and its affiliates (collectively, “LCS”). Pursuant to the terms of the definitive asset purchase agreement signed on January 26, 2015, the Company acquired the LCS Facilities for approximately $307.4 million at closing in an all cash transaction, excluding transaction related expenses of approximately $2.5 million that were recorded as general and administrative expense during the year ended December 31, 2015. The Company also acquired certain tangible and intangible assets and assumed certain accounts payable and accrued expenses pursuant to the asset purchase agreement. Additionally, LCS had the opportunity to receive an additional payment if the LCS Facilities exceeded certain performance targets over an 18-month period ending August 31, 2016 (the "Earnout Payment"). The aggregate amount of the purchase price paid at closing and the Earnout Payment, if achieved were not to exceed $350 million. The contingent payment had a zero fair value ascribed at the date of acquisition since management believed there was a remote possibility that any such payment would be made. Ultimately, there were no Earnout Payments made. Approximately $298 million of outstanding debt related to the facilities was repaid at closing using the cash consideration paid by the Company. The Company did not assume any debt as a result of the transaction. The Company financed the acquisition of the LCS Facilities with borrowings under its revolving credit facility.

The purchase price of $307.4 million has been allocated to the estimated fair values of the assets acquired and liabilities assumed as of February 17, 2015 as follows (in '000's):



Accounts receivable	$	9,338
Prepaid expenses and other current assets	183
Property and equipment	119,726
Intangible assets - management contracts	73,200
Total assets acquired	202,447
Accounts payable and accrued expenses	2,442
Total identifiable net assets	200,005
Goodwill	107,398
Total consideration paid	$	307,403

As shown above, the Company recorded $107.4 million of goodwill which is fully deductible for tax purposes. The Company believes its acquisition of the LCS Facilities provides synergies and strategic benefits which further position the Company to meet the demand for correctional and detention bed space in the United States. These factors contributed to the goodwill that was recorded upon consummation of the transaction. The goodwill and net assets acquired are included in the U.S. Corrections & Detention business segment. Revenues and earnings for LCS included in the consolidated results of the Company from the date of acquisition through December 31, 2015 were $55.5 million and $8.5 million, respectively.

Identifiable intangible assets purchased consist of facility management contracts and have an estimated useful life of 20. The acquired contracts in the acquisition of the LCS Facilities do not have contract expiration dates and are perpetual in nature.

The following unaudited supplemental pro forma financial information includes the results of operations of the LCS Facilities in 2015 and 2014 and is presented as if the LCS Facilities had been consolidated as of the beginning of the year immediately preceding the date of acquisition. The unaudited supplemental proforma financial information has been provided for illustrative purposes only. The unaudited pro forma financial information does not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented, or of the results that may be achieved by the combined companies in the future. Future results may vary significantly from the results reflected in the following unaudited pro forma financial information because of future events and transactions, as well as other factors, many of which are beyond the Company's control.

The unaudited pro forma combined financial information presented below has been prepared by adjusting the historical results of the Company to include the historical results of the acquisition described above. The unaudited pro forma combined historical results were then adjusted (i) to remove one-time acquisition costs of $1.8 million, net of tax; (ii) to increase amortization expense resulting from the incremental intangible assets acquired in the acquisition by $3.4 million, net of tax; (iii) to increase interest expense as a result of the cash consideration paid by $7.6 million, net of tax; and (iv) to increase depreciation expense as a result of the property and equipment acquired by $4.5 million. These adjustments related primarily to the 2014 adjustments to the table below. Amounts included for 2015 in the adjustments above are not significant to be presented separately. The unaudited pro forma financial information does not include any adjustments to reflect the impact of cost savings or other synergies that may result from this acquisition. As noted above, the unaudited pro forma financial information does not purport to be indicative of the actual results that would have been achieved by the combined companies for the periods presented or that may be achieved by the combined companies in the future.



	Year Ended December 31,
	2015		2014
	(unaudited, in thousands)
Pro forma financial information:
Revenue	$	1,848,351	$	1,765,391
Net income	$	140,468	$	146,091

Protocol Criminal Justice, Inc.

On February 25, 2014, Protocol Criminal Justice, Inc. ("Protocol"), a subsidiary of BI, entered into an Asset Purchase Agreement (the "Agreement") with an unrelated entity, APAC Customer Services, Inc., to acquire certain tangible and intangible assets for cash consideration of $13.0 million. The final purchase price allocation resulted in the recognition of intangible assets of $7.0 million related to acquired management contracts, acquired technology and trade name, and goodwill of $3.9 million. In addition, the Company acquired accounts receivable, equipment and assumed certain liabilities, none of which were significant. Protocol's activities are included in the GEO Care operating segment.