Business Combinations

12 Months Ended

Dec. 31, 2019

Community Education Centers Acquisition

On April 5, 2017, the Company completed its acquisition of CEC, pursuant to a definitive merger agreement entered into on February 12, 2017 between the Company, GEO/DE/MC/01 LLC, and CEC Parent Holdings LLC. CEC is a private provider of rehabilitation services for offenders in reentry and in-prison treatment facilities as well as management services for county, state and federal correctional and detention facilities. Under the terms of the merger agreement, the Company acquired 100% of the voting interests in CEC for $353.6 million.

The allocation of the purchase price for this transaction was complete as of March 31, 2018. During the measurement period, the Company adjusted provisional amounts with respect to the CEC acquisition that were recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Those changes are reflected in the table below. The purchase price allocation as of December 31, 2017 and as of March 31, 2018 and adjustments made to the estimated acquisition date fair values during the fiscal year ended December 31, 2018 are as follows (in thousands):



	Acquisition Date Estimated Fair Value as of December 31, 2017		Measurement Period Adjustments			Final Acquisition Date Fair Value as of March 31, 2018
Accounts Receivable	$	32,869	$	—		$	32,869
Prepaid and other current assets	4,397		—			4,397
Property and equipment	126,510		—			126,510
Intangible assets	76,000		—			76,000
Favorable lease assets	3,110		—			3,110
Deferred income tax assets	4,116		44			4,160
Other non-current assets	4,327		—			4,327
Total assets acquired	$	251,329	$	44		$	251,373
Accounts payable and accrued expenses	51,651		(1,339		)	50,312
Unfavorable lease liabilities	1,299		—			1,299
Other non-current liabilities	10,479		(1,166		)	9,313
Total liabilities assumed	$	63,429	$	(2,505	)	$	60,924
Total identifiable net assets	187,900		2,549			190,449
Goodwill	165,656		(2,549		)	163,107
Total consideration paid, net of cash acquired	$	353,556	$	—		$	353,556

The Company recognized a reduction of operating expenses of $2.3 million related to the CEC acquisition during the

twelve months ended December 31, 2018 as a result of a recovery of funds held in escrow after the measurement period had

ended.

As shown above, the Company recorded $163.1 million of goodwill related to the purchase of CEC. The strategic benefits of

the merger include the Company's ability to further position itself to meet the demand for increasingly diversified correctional,

detention and community reentry facilities and services and the Company's ability to expand the delivery of enhanced in-

prison rehabilitation including evidence-based treatment, integrated with post-release support services through GEO's

Continuum of Care platform. These factors contributed to the goodwill that was recorded upon consummation of the

transaction. The Company does not believe that any of the goodwill recorded as a result of the CEC acquisition will be

deductible for federal income tax purposes.

Identifiable intangible assets purchased in the acquisition and their weighted average amortization

periods in total and by major intangible asset class, as applicable, are included in the table below:



	Weighted Average Useful Life (years)	Fair Value as of April 5, 2017
Facility management contracts	18	$	75,300
Covenants not to compete	1	700
Total acquired intangible assets		$	76,000

Pro forma financial information (Unaudited)

The results of operations of CEC are included in the Company's results of operations from April 5, 2017. The following

unaudited pro forma information combines the consolidated results of operations of the Company and CEC as if the

acquisition had occurred at January 1, 2017, which is the beginning of the earliest period presented. The pro forma amounts are

included for comparative purposes and may not necessarily reflect the results of operations that would have resulted had the

acquisition been completed at the beginning of the applicable period and may not be indicative of the results that will be

attained in the future (in thousands):



	Year Ended (unaudited)
	December 31, 2017
Pro forma revenues	$	2,300,000
Pro forma net income attributable to the GEO Group, Inc.	$	160,000

The unaudited pro forma combined financial information presented above is compiled from the financial statements of the combined companies and includes pro forma adjustments for: (i) estimated changes in depreciation expense, interest expense and amortization expense; (ii) adjustments to eliminate intercompany transactions; (iii) adjustments to remove approximately $15 million, for the year ended December 31, 2017, respectively, of non-recurring transaction and merger related costs directly related to the CEC acquisition that are included in the combined companies’ financial results; and (iv) the income tax impact of the adjustments. 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.

The Company has included revenue and earnings of approximately $171 million and $22 million, respectively, in its

consolidated statements of operations for the year ended December 31, 2017 for CEC activity since April 5, 2017, the

date of acquisition.