Commitments and Contingencies

Operating Leases

The Company leases facilities, office space, computers and transportation equipment under non-cancelable operating leases expiring between 2019 and 2096. The future minimum commitments under these leases are as follows:



Fiscal Year	Annual Rental
	(In thousands)
2019	$	49,000
2020	34,000
2021	19,000
2022	15,000
2023	12,000
Thereafter	49,000
	$	178,000

The Company leases its corporate offices, which are both located in Boca Raton, Florida. One of the leases expires in March 2019 and has two 5-year renewal options, which if exercised would result in a maximum term ending in March 2029. The other lease expires in December 2028 and has two 5-year renewal options which if exercised will result in a maximum term ending in December 2038. The Company elected not to renew the first lease expiring in March 2019 as the Company purchased land in Boca Raton, Florida to construct a new corporate office building which is expected to be completed in the first quarter of 2019. 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, Philadelphia, Pennsylvania, Boulder, Colorado and Aurora, Illinois. The Company also leases office space in Sydney, and Melbourne Australia and in Sandton, South Africa through its overseas affiliates to support its Australian and South African operations, respectively. 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 $49.9 million, $45.4 million and $38.2 million for fiscal years 2018, 2017 and 2016, respectively.

Collective Bargaining Agreements

The Company had approximately 32% of its workforce covered by collective bargaining agreements at December 31, 2018. Collective bargaining agreements with 9% of employees are set to expire in less than one year.

Employment Agreements

On December 4, 2018, GEO entered into a Senior Officer Employment Agreement with Mr. Joe Negron to serve as Senior Vice President, General Counsel and Secretary of the Company. The term of the agreement will be for an initial period of two years, and terminating two years thereafter. The term will be automatically extended by one day every day such that it has a continuous "rolling" two-year term until the age of 67 years, unless otherwise terminated pursuant to the agreement. The agreement calls for an annual base salary of $0.4 million.

On February 12, 2018, GEO entered into a Senior Officer Employment Agreement with Mr. Richard K. Long to serve as Senior Vice President, Project Development of the Company. The term of the agreement will be for an initial period of two years, and terminating two years thereafter. The term will be automatically extended by one day every day such that it has a continuous "rolling" two-year term until the age of 67 years, unless otherwise terminated pursuant to the agreement. The agreement calls for an annual base salary of $0.4 million.

Contract Awards/Terminations

We were successful in a solicitation by the Delaware County Board of Prisons Inspectors for the continued management of the 1,931-bed George W. Hill Correctional Facility located in Delaware County Pennsylvania effective January 1, 2019. The contract has a base term through December 31, 2023 with two additional two year period renewal options.

On December 3, 2018, the Company announced that it had signed a five-year contract extension in Australia with the State of New South Wales, Corrective Services for the continued management and expansion of the Junee Correctional Centre (the "Centre"). The Centre is currently undergoing a 489-bed expansion project which will bring its total capacity to 1,279 beds during 2019. The five-year agreement will be effective from April 1, 2019 through March, 31, 2024.

On June 26, 2018, we announced that we had signed a contract with the Idaho Department of Corrections for the housing, management and supervision of approximately 670 medium-custody inmates at the company-owned Eagle Pass Detention Facility in Eagle Pass, Texas and the company-owned Karnes Correctional Center in Karnes City, Texas. The contract has a term of two years effective October 1, 2018.

On March 29, 2018, we announced that our transportation joint venture in the United Kingdom, GEO Amey, had signed a contract with Scottish Prison Service for the provision of court custody and prisoner escort services in Scotland. The contract has a base term of eight years effective January 26, 2019 with a renewal option of four years.

With respect to the Parklea Centre in Australia, we were unfortunately unsuccessful during the current competitive rebid process and will transition the management contract in March of 2019. Upon transition, due to the requirements under the labor and employment laws in Australia, we will incur approximately $3 million in certain transition costs related to employee compensation and benefits. These costs have been reserved for as of December 31, 2018.

Effective in April 2018, our contract for the management of the 1,576-bed Allen Correctional Facility in Kinder, Louisiana, terminated. Due to state budgetary reductions, GEO elected to terminate the contract.

Commitments

The Company currently has contractual commitments for a number of projects using existing Company financing facilities. The Company’s management estimates that these existing capital projects will cost approximately $255.3 million, of which $210.8 million was spent through 2018. The Company estimates the remaining capital requirements related to these capital projects to be approximately $44.5 million. These projects are expected to be completed through 2020.

In addition to these current estimated capital requirements, 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 could materially increase.

Litigation, Claims and Assessments

As previously reported and described in our prior periodic reports, including most recently in our Form 10-Q for the quarter ended June 30, 2018, on February 8, 2017, former civil immigration detainees at the Aurora Immigration Detention Center filed a class action lawsuit on October 22, 2014, against the Company in the United States District Court for the District of Colorado (the “Court”). The complaint alleges that the Company was in violation of the Colorado Minimum Wages of Workers Act and the federal Trafficking Victims Protection Act ("TVPA"). The plaintiff class claims that the Company was unjustly enriched because of the level of payment the detainees received for work performed at the facility, even though the voluntary work program as well as the wage rates and standards associated with the program that are at issue in the case are authorized by the Federal government under guidelines approved by the United States Congress. On July 6, 2015, the Court found that detainees were not employees under the Colorado Minimum Wage Order and dismissed this claim. In February 2017, the Court granted the plaintiff-class’ motion for class certification. The plaintiff class seeks actual damages, compensatory damages, exemplary damages, punitive damages, restitution, attorneys’ fees and costs, and such other relief as the Court may deem proper. In the time since the Colorado suit was initially filed, three similar lawsuits have been filed - two in Washington and one in California. In Washington, one of the two lawsuits was filed on September 9, 2017 by immigration detainees against the Company in the U.S. District Court for the Western District of Washington. The second was filed on September 20, 2017 by the State Attorney General against the Company in the Superior Court of the State of Washington for Pierce County, which the Company removed to the U.S. District Court for the Western District of Washington on October 9, 2017. In California, a class-action lawsuit was filed on December 19, 2017 by immigration detainees against the Company in the U.S. District Court Eastern Division of the Central District of California. All three lawsuits allege violations of the respective state’s minimum wage laws. However, the California lawsuit, like the Colorado suit, also includes claims based that the Company violated the TVPA and California's equivalent state statute. The Company intends to take all necessary steps to vigorously defend itself and has consistently refuted the allegations and claims in these lawsuits. The Company has not recorded an accrual relating to these matters at this time, as a loss is not considered probable nor reasonably estimable at this stage of the lawsuit.

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. The Company accrues for legal costs associated with loss contingencies when those costs are probable and reasonably estimable. 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.

Other Assessment

A state non-income tax audit completed in 2016 included tax periods for which the state tax authority had a number of years ago processed a substantial tax refund. At the completion of the audit fieldwork, the Company received a notice of audit findings disallowing deductions that were previously claimed by the Company, approved by the state tax authority and served as the basis for the approved refund claim. In early January 2017, the Company received a formal Notice of Assessment of Taxes and Demand for Payment from the taxing authority disallowing the deductions. The total tax, penalty and interest assessed is approximately $19.6 million. The Company has filed an administrative protest and disagrees with the assessment and intends to take all necessary steps to vigorously defend its position. 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 outside counsel in connection with this matter.