Business Segments and Geographic Information

12 Months Ended

Dec. 31, 2019

Business Segments and Geographic Information

Operating and Reporting Segments

The Company conducts its business through four reportable business segments: the U.S. Secure Services segment; the GEO Care segment; the International Services segment; and Facility Construction & Design segment. The Company has identified these four reportable segments to reflect the current view that the Company operates four distinct business lines, each of which constitutes a material part of its overall business. The U.S. Secure Services segment primarily encompasses U.S.-based secure services business. The Company’s community-based services, youth services and BI are operating segments aggregated under the GEO Care reporting segment. The GEO Care segment, which conducts its services in the United States, represents services provided to adults and juveniles for non-residential treatment, educational and community based programs, pre-release and half-way house programs, compliance technologies, monitoring services and evidence-based supervision and treatment programs for community-based parolees, probationers, and pretrial defendants. The International Services segment primarily consists of secure services operations in South Africa, Australia and the United Kingdom. The Facility Construction & Design segment primarily contracts with various state, local and federal agencies for the design and construction of facilities for which the Company has management contracts. Generally, the assets and revenues from the Facility Construction & Design segment are offset by a similar amount of liabilities and expenses. Segment disclosures below (in thousands) reflect the results of continuing operations. All transactions between segments are eliminated.



Fiscal Year	2019			2018			2017
Revenues:
U.S. Secure Services	$	1,601,679		$	1,492,973		$	1,438,044
GEO Care	614,249			580,313			514,166
International Services	232,016			253,874			195,806
Facility Construction and Design [1] [2]	29,978			4,226			115,404
Total revenues	$	2,477,922		$	2,331,386		$	2,263,420
Capital Expenditures:
U.S. Secure Services	$	69,074		$	163,208		$	117,186
GEO Care	45,000			30,136			24,263
International Services	1,468			2,322			6,957
Total capital expenditures [1]	$	115,542		$	195,666		$	148,406
Depreciation and amortization:
U.S. Secure Services	$	78,974		$	76,801		$	75,276
GEO Care	49,781			47,546			47,103
International Services	2,070			2,087			1,918
Total depreciation and amortization [1]	$	130,825		$	126,434		$	124,297
Operating Income:
U.S. Secure Services	$	322,506		$	297,453		$	302,488
GEO Care	147,036			138,911			123,525
International Services	16,723			12,816			14,235
Facility Construction & Design [1] [2]	74			—			(1,620		)
Operating income from segments	$	486,339		$	449,180		$	438,628
General and Administrative Expenses	(185,926		)	(184,515		)	(190,343		)
Total operating income	$	300,413		$	264,665		$	248,285

[1] The Company began the design and construction of a secure facility located in Ravenhall, a locality near Melbourne, Australia in 2014. The facility was completed in November 2017. There were no capital expenditures or depreciation or amortization associated with this segment in 2019, 2018 or 2017. Refer to Note 7 - Contract Receivable.

[2] During 2019 and 2018, the Company had facility construction & design revenues related to an expansion project at its Fulham Correctional Centre in Australia which is expected to be completed in the third quarter of 2020.

Pre-Tax Income Reconciliation of Segments

The following is a reconciliation of the Company’s total operating income from its reportable segments to the Company’s income before income taxes and equity in earnings of affiliates, in each case, during the years ended December 31, 2019, 2018 and 2017, respectively.



Fiscal Year Ended	2019			2018			2017
	(In thousands)
Operating income from segments	$	486,339		$	449,180		$	438,628
Unallocated amounts:
General and administrative expense	(185,926		)	(184,515		)	(190,343		)
Net interest expense	(122,090		)	(115,348		)	(96,348		)
Loss on extinguishment of debt	(4,795		)	—			—
Income before income taxes and equity in earnings of affiliates	$	173,528		$	149,317		$	151,937



	2019		2018		2017
	(In thousands)
Segment assets:
U.S. Secure Services	$	2,618,629	$	2,590,722	$	2,385,069
GEO Care	1,112,880		1,063,484		1,121,792
International Services	82,097		84,911		40,056
Facility Construction & Design	371,846		383,713		499,406
Total segment assets	$	4,185,452	$	4,122,830	$	4,046,323

Asset Reconciliation

The following is a reconciliation of the Company’s reportable segment assets to the Company’s total assets as of December 31, 2019 and 2018, respectively.



	2019		2018
	(In thousands)
Reportable segment assets	$	4,185,452	$	4,122,830
Cash	32,463		31,255
Deferred income tax assets	36,278		29,924
Restricted cash and investments, current and non-current	63,341		74,109
Total assets	$	4,317,534	$	4,258,118

Geographic Information

During each of the years ended December 31, 2019, 2018 and 2017, the Company’s international operations were conducted through (i) the Company’s wholly owned Australian subsidiary, The GEO Group Australia Pty. Ltd., through which the Company has management contracts for four correctional facilities, (ii) the Company's wholly owned subsidiaries, GEO Ravenhall Finance Holdings Pty. Ltd. and GEO Ravenhall Holdings Pty. Ltd. which, together, had a design and construction contract for a facility in Ravenhall, Australia which was completed in November 2017, (iii) the Company’s wholly-owned subsidiary in South Africa, SACM, through which the Company manages one correctional facility, and (iv) the Company’s wholly-owned subsidiary in the United Kingdom, The GEO Group UK Ltd., through which the Company manages the Dungavel House Immigration Removal Centre.



Fiscal Year	2019		2018		2017
	(In thousands)
Revenues:
U.S. operations	$	2,216,401	$	2,073,286	$	1,952,210
Australia operations	235,462		231,164		285,702
South African operations	18,779		19,806		18,251
United Kingdom operations	7,280		7,130		7,257
Total revenues	$	2,477,922	$	2,331,386	$	2,263,420
Property and Equipment, net:
U.S. operations	$	2,131,877	$	2,145,197	$	2,061,711
Australia operations	12,215		13,006		16,281
South African operations	182		88		131
United Kingdom operations	448		319		—
Total Property and Equipment, net	$	2,144,722	$	2,158,610	$	2,078,123

Sources of Revenue

The Company derives most of its revenue from the management of secure facilities through public-private partnerships. The Company also derives revenue from the provision of community based and youth services, monitoring and evidence-based

supervision and treatment programs in the United States, and expansion of new and existing secure facilities, processing centers and reentry centers.



Fiscal Year	2019		2018		2017
	(In thousands)
Revenues:
Secure Services	$	1,833,695	$	1,746,847	$	1,633,850
GEO Care	614,249		580,313		514,166
Facility Construction and Design	29,978		4,226		115,404
Total revenues	$	2,477,922	$	2,331,386	$	2,263,420

Equity in Earnings of Affiliates

Equity in earnings of affiliates for 2019, 2018 and 2017 includes the operating results of the Company’s joint ventures in SACS and GEOAmey. These joint ventures are accounted for under the equity method and the Company’s investments in SACS and GEOAmey are presented as a component of other non-current assets in the accompanying Consolidated Balance Sheets.

The Company has recorded $5.0 million, $7.4 million and $10.8 million in earnings, net of tax impact, for SACS operations during the years ended December 31, 2019, 2018 and 2017, respectively, which are included in equity in earnings of affiliates, net of income tax provision in the accompanying Consolidated Statements of Operations. During 2017, SACS was successful in obtaining a favorable tax judgment which resulted in an increase in earnings net of taxes of $5.5 million As of December 31, 2019 and 2018, the Company’s investment in SACS was $12.3 million and $13.4 million, respectively. The investment is included in other non-current assets in the accompanying Consolidated Balance Sheets. The Company received dividend distributions of $6.3 million and $11.8 million, in 2019 and 2018, respectively from this unconsolidated joint venture.

The Company has recorded $4.6 million, $2.2 million and $1.2 million in earnings, net of tax impact, for GEOAmey’s operations during the years ended December 31, 2019, 2018 and 2017, respectively, which are included in equity in earnings of affiliates, net of income tax provision, in the accompanying Consolidated Statements of Operations. As of December 31, 2019 and 2018, the Company’s investment in GEOAmey was $5.7 million and $4.8 million, respectively, and represents its share of cumulative reported earnings. The Company received dividend distributions of $4.0 million in 2019 from this unconsolidated joint venture. There were no dividend distributions from this unconsolidated joint venture in 2018.

Business Concentration

Except for the major customer noted in the following table, no other single customer made up greater than 10% of the Company’s consolidated revenues for the following fiscal years:



Customer	2019		2018		2017
Various agencies of the U.S Federal Government:	53	%	50	%	48	%

The concentrations above relate entirely to the Company's U.S. Secure Services segment.

Credit risk related to accounts receivable is reflective of the related revenues.