ITEM 1. FINANCIAL STATEMENTS
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The GEO Group, Inc., a Florida corporation, and subsidiaries (the “Company” or “GEO”) is a fully-integrated real estate investment trust (“REIT”) specializing in the design, financing, development and operation of secure facilities, processing centers and community reentry centers in the United States, Australia, South Africa and the United Kingdom. The Company owns, leases and operates a broad range of facilities including maximum, medium and minimum security facilities, processing centers, as well as community-based reentry facilities and offers an expanded delivery of rehabilitation services under its 'GEO Continuum of Care' platform. The 'GEO Continuum of Care' program integrates enhanced rehabilitative programs, which are evidence-based and include cognitive behavioral treatment and post-release services, and provides academic and vocational classes in life skills and treatment programs while helping individuals reintegrate into their communities. The Company develops new facilities based on contract awards, using its project development expertise and experience to design, construct and finance what it believes are state-of-the-art facilities that maximize security and efficiency. The Company provides innovative compliance technologies, industry-leading monitoring services, and evidence-based supervision and treatment programs for community-based parolees, probationers and pretrial defendants. The Company also provides secure transportation services for individuals as contracted domestically and in the United Kingdom through its joint venture GEO Amey PECS Ltd. (“GEOAmey”). At March 31, 2020, the Company’s worldwide operations include the management and/or ownership of approximately 94,000 beds at 126 facilities, including idle facilities, projects under development and recently awarded contracts, and also include the provision of community supervision services for more than 210,000 individuals, including approximately 100,000 through an array of technology products including radio frequency, GPS, and alcohol monitoring devices.
The Company's unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States and the instructions to Form 10-Q and consequently do not include all disclosures required by Form 10-K. The accounting policies followed for quarterly financial reporting are the same as those disclosed in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2020 for the year ended December 31, 2019. The accompanying December 31, 2019 consolidated balance sheet has been derived from those audited financial statements. Additional information may be obtained by referring to the Company’s Form 10-K for the year ended December 31, 2019. In the opinion of management, all adjustments (consisting only of normal recurring items) necessary for a fair presentation of the financial information for the interim periods reported in this Quarterly Report on Form 10-Q have been made. Results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results for the entire year ending December 31, 2020, or for any other future interim or annual periods.
Risks and uncertainties
In December 2019, a novel strain of coronavirus, now known as COVID-19 (“COVID-19”), was reported in Wuhan, China and has since extensively impacted the global health and economic environment. In January 2020, the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern. On February 28, 2020, the WHO raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on March 11, 2020, the WHO characterized COVID-19 as a pandemic.
The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business and geographies, including how it will impact those entrusted in its care and governmental partners. While the Company did not incur significant disruptions during the three months ended March 31, 2020 from the COVID-19 pandemic, it is unable to predict the impact that the COVID-19 pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties.
The COVID-19 pandemic and related government-imposed mandatory closures, shelter in-place restrictions and social distancing protocols have had, and will continue to have, a severe impact on global economic conditions and the environment in which the Company operates. Starting in late March and early April, the Company began to observe negative impacts from the pandemic on its performance in its secure services business, specifically with its ICE Processing Centers and U.S. Marshals Facilities, as a result of declines in crossings and apprehensions along the Southwest border, as well as, a decrease in court sentencing at the federal level. Additionally, its reentry services business conducted through its GEO Care business segment has also been negatively impacted, specifically its residential reentry centers and non-residential day reporting programs were impacted by declines in programs due to lower levels of referrals by federal, state and local agencies. Additionally, the Company has experienced the transmission of COVID-19 at a small number of our facilities in the second quarter of 2020. If the Company is unable to mitigate the transmission of COVID-19 at its facilities it could experience a material adverse effect on its financial position, results of operations and cash flows. Although the Company is unable to predict the duration or scope of the COVID-19 pandemic or estimate the extent of the negative financial impact to its operating results, an extended period of depressed economic activity necessitated to combating the disease, and the severity and duration of the related global economic crisis will adversely impact its future financial performance.
7
Table of Contents
2. GOODWILL AND OTHER INTANGIBLE ASSETS
The Company has recorded goodwill as a result of its various business combinations. Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the tangible assets and intangible assets acquired net of liabilities assumed, including noncontrolling interests. Changes in the Company's goodwill balances from January 1, 2020 to March 31, 2020 are as follows (in thousands):
|
|
January 1,
2020
|
|
|
Foreign Currency
Translation
|
|
|
March 31,
2020
|
|
GEO Secure Services
|
|
$
|
316,366
|
|
|
$
|
—
|
|
|
$
|
316,366
|
|
GEO Care
|
|
|
459,589
|
|
|
|
—
|
|
|
|
459,589
|
|
International Services
|
|
|
401
|
|
|
|
(50
|
)
|
|
|
351
|
|
Total Goodwill
|
|
$
|
776,356
|
|
|
$
|
(50
|
)
|
|
$
|
776,306
|
|
The Company has also recorded other finite and indefinite-lived intangible assets as a result of its various business combinations. The Company's intangible assets include facility management contracts, covenants not to compete, trade names and technology, as follows (in thousands):
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
|
Weighted
Average
Useful Life
(years)
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
Facility management contracts
|
|
|
16.3
|
|
|
$
|
308,318
|
|
|
$
|
(153,337
|
)
|
|
$
|
154,981
|
|
|
$
|
308,432
|
|
|
$
|
(148,171
|
)
|
|
$
|
160,261
|
|
Technology
|
|
|
7.3
|
|
|
|
33,700
|
|
|
|
(29,494
|
)
|
|
|
4,206
|
|
|
|
33,700
|
|
|
|
(29,091
|
)
|
|
|
4,609
|
|
Trade names
|
|
Indefinite
|
|
|
|
45,200
|
|
|
|
—
|
|
|
|
45,200
|
|
|
|
45,200
|
|
|
|
—
|
|
|
|
45,200
|
|
Total acquired intangible assets
|
|
|
|
|
|
$
|
387,218
|
|
|
$
|
(182,831
|
)
|
|
$
|
204,387
|
|
|
$
|
387,332
|
|
|
$
|
(177,262
|
)
|
|
$
|
210,070
|
|
Amortization expense was $5.6 million for each of the three months ended March 31, 2020 and 2019, respectively. Amortization expense was primarily related to the GEO Secure Services and GEO Care segments' amortization of acquired facility management contracts. As of March 31, 2020, the weighted average period before the next contract renewal or extension for the acquired facility management contracts was approximately 1.7 years. Although the facility management contracts acquired have renewal and extension terms in the near term, the Company has historically maintained these relationships beyond the current contractual periods.
Estimated amortization expense related to the Company's finite-lived intangible assets for the remainder of 2020 through 2024 and thereafter is as follows (in thousands):
Fiscal Year
|
|
Total
Amortization
Expense
|
|
Remainder of 2020
|
|
$
|
17,267
|
|
2021
|
|
|
19,766
|
|
2022
|
|
|
18,122
|
|
2023
|
|
|
13,478
|
|
2024
|
|
|
9,745
|
|
Thereafter
|
|
|
80,809
|
|
|
|
$
|
159,187
|
|
8
Table of Contents
3. FINANCIAL INSTRUMENTS
The following tables provide a summary of the Company’s significant financial assets and liabilities carried at fair value and measured on a recurring basis as of March 31, 2020 and December 31, 2019 (in thousands):
|
|
|
|
|
|
Fair Value Measurements at March 31, 2020
|
|
|
|
Carrying Value at
March 31,
2020
|
|
|
Quoted Prices in
Active Markets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rabbi Trust
|
|
$
|
24,969
|
|
|
$
|
—
|
|
|
$
|
24,969
|
|
|
$
|
—
|
|
Fixed income securities
|
|
|
1,829
|
|
|
|
—
|
|
|
|
1,829
|
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap derivatives
|
|
$
|
7,616
|
|
|
$
|
—
|
|
|
$
|
7,616
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2019
|
|
|
|
Carrying Value at
December 31,
2019
|
|
|
Quoted Prices in
Active Markets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rabbi Trust
|
|
$
|
28,332
|
|
|
$
|
—
|
|
|
$
|
28,332
|
|
|
$
|
—
|
|
Fixed income securities
|
|
|
1,892
|
|
|
|
—
|
|
|
|
1,892
|
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap derivatives
|
|
$
|
1,869
|
|
|
$
|
—
|
|
|
$
|
1,869
|
|
|
$
|
—
|
|
The Company’s Level 2 financial instruments included in the tables above as of March 31, 2020 and December 31, 2019 consist of interest rate swap derivative liabilities held by GEO and the Company's Australian subsidiary, the Company's rabbi trust established for GEO employee and employer contributions to The GEO Group, Inc. Non-qualified Deferred Compensation Plan and an investment in Canadian dollar denominated fixed income securities. On May 22, 2019, the Company terminated the interest rate swap derivative liabilities in connection with a debt refinancing transaction by our Australian subsidiary. Refer to Note 9 - Derivative Financial Instruments and Note 10 - Debt for additional information.
The interest rate swap derivative liabilities are valued using a discounted cash flow model based on projected borrowing rates. The Company's restricted investment in the rabbi trust is invested in Company-owned life insurance policies which are recorded at their cash surrender values. These investments are valued based on the underlying investments held in the policies' separate account. The underlying assets are equity and fixed income pooled funds that are comprised of Level 1 and Level 2 securities. The Canadian dollar denominated securities, not actively traded, are valued using quoted rates for these and similar securities.
9
Table of Contents
4. FAIR VALUE OF ASSETS AND LIABILITIES
The Company’s consolidated balance sheets reflect certain financial assets and liabilities at carrying value. The carrying value of certain debt instruments, if applicable, is net of unamortized discount. The following tables present the carrying values of those financial instruments and the estimated corresponding fair values at March 31, 2020 and December 31, 2019 (in thousands):
|
|
|
|
|
|
Estimated Fair Value Measurements at March 31, 2020
|
|
|
|
Carrying Value as
of March 31,
2020
|
|
|
Total Fair
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
32,414
|
|
|
$
|
32,414
|
|
|
$
|
32,414
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash and investments
|
|
|
30,167
|
|
|
|
30,167
|
|
|
|
30,167
|
|
|
|
—
|
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under senior credit facility
|
|
$
|
1,265,886
|
|
|
$
|
1,091,696
|
|
|
$
|
—
|
|
|
$
|
1,091,696
|
|
|
$
|
—
|
|
5.875% Senior Notes due 2022
|
|
|
193,958
|
|
|
|
174,190
|
|
|
|
—
|
|
|
|
174,190
|
|
|
|
—
|
|
5.125% Senior Notes due 2023
|
|
|
294,500
|
|
|
|
224,586
|
|
|
|
—
|
|
|
|
224,586
|
|
|
|
—
|
|
5.875% Senior Notes due 2024
|
|
|
250,000
|
|
|
|
180,398
|
|
|
|
—
|
|
|
|
180,398
|
|
|
|
—
|
|
6.00% Senior Notes due 2026
|
|
|
350,000
|
|
|
|
228,806
|
|
|
|
—
|
|
|
|
228,806
|
|
|
|
—
|
|
Non-recourse debt
|
|
|
288,074
|
|
|
|
288,153
|
|
|
|
—
|
|
|
|
288,153
|
|
|
|
—
|
|
|
|
|
|
|
|
Estimated Fair Value Measurements at December 31, 2019
|
|
|
|
Carrying Value as
of December 31,
2019
|
|
|
Total Fair
Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
32,463
|
|
|
$
|
32,463
|
|
|
$
|
32,463
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash and investments
|
|
|
35,010
|
|
|
|
35,010
|
|
|
|
35,010
|
|
|
|
—
|
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under senior credit facility
|
|
$
|
1,298,671
|
|
|
$
|
1,218,861
|
|
|
$
|
—
|
|
|
$
|
1,218,861
|
|
|
$
|
—
|
|
5.875% Senior Notes due 2022
|
|
|
193,958
|
|
|
|
194,239
|
|
|
|
—
|
|
|
|
194,239
|
|
|
|
—
|
|
5.125% Senior Notes due 2023
|
|
|
300,000
|
|
|
|
287,982
|
|
|
|
—
|
|
|
|
287,982
|
|
|
|
—
|
|
5.875% Senior Notes due 2024
|
|
|
250,000
|
|
|
|
228,493
|
|
|
|
—
|
|
|
|
228,493
|
|
|
|
—
|
|
6.00% Senior Notes due 2026
|
|
|
350,000
|
|
|
|
314,052
|
|
|
|
—
|
|
|
|
314,052
|
|
|
|
—
|
|
Non-recourse debt
|
|
|
328,178
|
|
|
|
327,792
|
|
|
|
—
|
|
|
|
327,792
|
|
|
|
—
|
|
The fair values of the Company’s cash and cash equivalents, and restricted cash and investments approximates the carrying values of these assets at March 31, 2020 and December 31, 2019. Restricted cash consists of money market funds, bank deposits, commercial paper and time deposits used for asset replacement funds and other funds contractually required to be maintained at the Company's Australian subsidiary. The fair value of the money market funds and bank deposits is based on quoted market prices (Level 1) and the fair value of commercial paper and time deposits is based on market prices for similar instruments (Level 2).
The fair values of the Company's 5.875% senior unsecured notes due 2022 ("5.875% Senior Notes due 2022"), 5.875% senior unsecured notes due 2024 ("5.875% Senior Notes due 2024"), 6.00% senior unsecured notes due 2026 (“6.00% Senior Notes”), and the 5.125% senior unsecured notes due 2023 ("5.125% Senior Notes"), although not actively traded, are based on published financial data for these instruments. The fair values of the Company's non-recourse debt related to the Washington Economic Development Finance Authority ("WEDFA") and the Company’s Australian subsidiary are estimated based on market prices of similar instruments. The fair value of borrowings under the senior credit facility is based on an estimate of trading value considering the Company’s borrowing rate, the undrawn spread and similar instruments.
10
Table of Contents
5. RESTRICTED CASH AND CASH EQUIVALENTS
The following table provides a reconciliation of cash, cash equivalents and restricted cash and cash equivalents reported on the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows:
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
Cash and cash equivalents
|
|
$
|
32,414
|
|
|
$
|
67,728
|
|
Restricted cash and cash equivalents - current
|
|
|
27,865
|
|
|
|
53,749
|
|
Restricted cash and investments - non-current
|
|
|
27,271
|
|
|
|
27,282
|
|
Less Restricted investments - non-current
|
|
|
(24,969
|
)
|
|
|
(24,954
|
)
|
Total cash, cash equivalents and restricted cash and cash
equivalents shown in the statement of cash flows
|
|
$
|
62,581
|
|
|
$
|
123,805
|
|
Amounts included in restricted cash and cash equivalents are attributable to certain contractual cash restriction requirements at the Company's wholly owned Australian subsidiary related to non-recourse debt and asset replacement funds contractually required to be maintained and other guarantees. Restricted investments - non-current (included in Restricted Cash and Investments in the accompanying consolidated balance sheets) consists of the Company's rabbi trust established for employee and employer contributions to The GEO Group, Inc. Non-qualified Deferred Compensation Plan and is not considered to be a restricted cash equivalent. Refer to Note 3 - Financial Instruments.
6. SHAREHOLDERS’ EQUITY
The following table presents the changes in shareholders’ equity that are attributable to the Company’s shareholders and to noncontrolling interests for the three months ended March 31, 2020 and 2019 (in thousands):
|
|
Common shares
|
|
|
Additional
Paid-In
|
|
|
Distributions
in Excess of
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Treasury shares
|
|
|
Noncontrolling
|
|
|
Total
Shareholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Loss
|
|
|
Shares
|
|
|
Amount
|
|
|
Interests
|
|
|
Equity
|
|
For the Three
Months Ended
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2020
|
|
|
121,225
|
|
|
$
|
1,254
|
|
|
$
|
1,230,865
|
|
|
$
|
(119,779
|
)
|
|
$
|
(20,335
|
)
|
|
|
4,210
|
|
|
$
|
(95,175
|
)
|
|
$
|
(782
|
)
|
|
$
|
996,048
|
|
Stock-based
compensation
expense
|
|
|
—
|
|
|
|
—
|
|
|
|
9,768
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,768
|
|
Restricted stock granted
|
|
|
900
|
|
|
|
9
|
|
|
|
(9
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Restricted stock
canceled
|
|
|
(21
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Dividends paid [1]
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(57,703
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(57,703
|
)
|
Other adjustment to additional paid-in capital [2]
|
|
|
—
|
|
|
|
—
|
|
|
|
8,925
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,925
|
|
Purchase of treasury shares
|
|
|
(554
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
554
|
|
|
|
(9,009
|
)
|
|
|
—
|
|
|
|
(9,009
|
)
|
Shares withheld for net
settlements of share-
based awards [3]
|
|
|
(174
|
)
|
|
|
(2
|
)
|
|
|
(2,630
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,632
|
)
|
Issuance of common
stock - ESPP
|
|
|
10
|
|
|
|
1
|
|
|
|
149
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150
|
|
Net income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,181
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(60
|
)
|
|
|
25,121
|
|
Other comprehensive
income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(13,164
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(48
|
)
|
|
|
(13,212
|
)
|
Balance, March 31,
2020
|
|
|
121,386
|
|
|
$
|
1,262
|
|
|
$
|
1,247,068
|
|
|
$
|
(152,301
|
)
|
|
$
|
(33,499
|
)
|
|
|
4,764
|
|
|
$
|
(104,184
|
)
|
|
$
|
(890
|
)
|
|
$
|
957,456
|
|
11
Table of Contents
|
|
Common shares
|
|
|
Additional
Paid-In
|
|
|
Distributions in
Excess of
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Treasury shares
|
|
|
Noncontrolling
|
|
|
Total
Shareholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Loss
|
|
|
Shares
|
|
|
Amount
|
|
|
Interests
|
|
|
Equity
|
|
For the Three
Months Ended
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2019
|
|
$
|
120,585
|
|
|
$
|
1,248
|
|
|
$
|
1,210,916
|
|
|
$
|
(52,868
|
)
|
|
$
|
(23,618
|
)
|
|
|
4,210
|
|
|
$
|
(95,175
|
)
|
|
$
|
(599
|
)
|
|
$
|
1,039,904
|
|
Proceeds from exercise
of stock options
|
|
|
22
|
|
|
|
—
|
|
|
|
333
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
333
|
|
Stock-based
compensation
expense
|
|
|
—
|
|
|
|
—
|
|
|
|
6,727
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,727
|
|
Restricted stock
granted
|
|
|
778
|
|
|
|
8
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
-
|
|
Restricted stock
canceled
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
-
|
|
Dividends paid
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(57,945
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(57,945
|
)
|
Shares withheld for net
settlements of share-
based awards [3]
|
|
|
(198
|
)
|
|
|
(2
|
)
|
|
|
(4,170
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,172
|
)
|
Transition adjustment for accounting standard adoption [4]
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(968
|
)
|
|
|
968
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
-
|
|
Issuance of common
stock - ESPP
|
|
|
6
|
|
|
|
—
|
|
|
|
124
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
124
|
|
Net income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
40,705
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(56
|
)
|
|
|
40,649
|
|
Other comprehensive
income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,284
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,284
|
|
Balance,
March 31, 2019
|
|
|
121,187
|
|
|
$
|
1,254
|
|
|
$
|
1,213,922
|
|
|
$
|
(71,076
|
)
|
|
$
|
(21,366
|
)
|
|
|
4,210
|
|
|
$
|
(95,175
|
)
|
|
$
|
(655
|
)
|
|
$
|
1,026,904
|
|
[1]
|
Dividends paid are net of dividends forfeited on unvested shares of restricted stock.
|
[2]
|
On February 26, 2020 (the "Effective Date"), the Company and its Chief Executive Officer (“CEO”) entered into an amended and restated executive retirement agreement that amends and replaces the CEO’s prior executive retirement agreement. The amended and restated executive retirement agreement provides that upon the CEO’s retirement from the Company, the Company will pay a lump sum amount currently equal to $8,925,065 (the “Grandfathered Payment”) which will be paid in the form of the Company’s common stock. The fair value of the Grandfathered payment was reclassified to stockholders’ equity as of March 31, 2020. Refer to Note 13 – Benefit Plans for further information.
|
[3]
|
During the three months ended March 31, 2020 and 2019, the Company withheld shares through net share settlements to satisfy statutory tax withholding requirements upon vesting of shares of restricted stock held by employees.
|
[4]
|
On January 1, 2019, the Company adopted Accounting Standard Update ("ASU") No. 2018-02 "Income Statement-Reporting Comprehensive Income-Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income".
|
REIT Distributions
As a REIT, GEO is required to distribute annually at least 90% of its REIT taxable income (determined without regard to the dividends paid deduction and by excluding net capital gain) and began paying regular quarterly REIT dividends in 2013. The amount, timing and frequency of future dividends, however, will be at the sole discretion of GEO's Board of Directors (the "Board”) and will be declared based upon various factors, many of which are beyond GEO's control, including, GEO's financial condition and operating cash flows, the amount required to maintain REIT status, limitations on distributions in GEO's existing and future debt instruments, limitations on GEO's ability to fund distributions using cash generated through GEO's taxable REIT subsidiaries ("TRSs") and other factors that GEO's Board may deem relevant.
12
Table of Contents
During the three months ended March 31, 2020 and the year ended December 31, 2019, GEO declared and paid the following regular cash distributions to its shareholders as follows:
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Distribution
Per Share
|
|
|
Aggregate
Payment Amount
(in millions)
|
|
February 4, 2019
|
|
February 15, 2019
|
|
February 22, 2019
|
|
$
|
0.48
|
|
|
$
|
57.9
|
|
April 3, 2019
|
|
April 15, 2019
|
|
April 22, 2019
|
|
$
|
0.48
|
|
|
$
|
58.2
|
|
July 9, 2019
|
|
July 19, 2019
|
|
July 26, 2019
|
|
$
|
0.48
|
|
|
$
|
58.2
|
|
October 14, 2019
|
|
October 25, 2019
|
|
November 1, 2019
|
|
$
|
0.48
|
|
|
$
|
58.2
|
|
February 3, 2020
|
|
February 14, 2020
|
|
February 21, 2020
|
|
$
|
0.48
|
|
|
$
|
58.2
|
|
Stock Buyback Program
On February 14, 2018, the Company announced that its Board authorized a stock buyback program authorizing the Company to repurchase up to a maximum of $200.0 million of its shares of common stock. The stock buyback program will be funded primarily with cash on hand, free cash flow and borrowings under the Company's $900.0 million revolving credit facility (the "Revolver"). The program is effective through October 20, 2020. The stock buyback program is intended to be implemented through purchases made from time to time in the open market or in privately negotiated transactions, in accordance with applicable Securities and Exchange Commission ("SEC") requirements. The stock buyback program does not obligate the Company to purchase any specific amount of the Company's common stock and may be suspended or extended at any time at the discretion of the Company's Board. The Company repurchased 553,665 shares of its common stock during the three months ended March 31, 2020. Refer to Note 13 – Benefit Plans for further information. The Company believes it has the ability to continue to fund the stock buyback program, its debt service requirements and its maintenance and growth capital expenditure requirements, while maintaining sufficient liquidity for other corporate purposes.
Prospectus Supplement
On October 20, 2017, the Company filed with the SEC an automatic shelf registration on Form S-3. Under this shelf registration, the Company may, from time to time, sell any combination of securities described in the prospectus in one or more offerings. Each time that the Company may sell securities, the Company will provide a prospectus supplement that will contain specific information about the terms of that offering and the securities being offered. On November 9, 2017, in connection with the shelf registration, the Company filed with the SEC a prospectus supplement related to the offer and sale from time to time of the Company’s common stock at an aggregate offering price of up to $150 million through sales agents. Sales of shares of the Company’s common stock under the prospectus supplement and the equity distribution agreements entered into with the sales agents, if any, may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933. There were no shares of common stock sold under this prospectus supplement during the three months ended March 31, 2020 or 2019.
Comprehensive Income (Loss)
Comprehensive income (loss) represents the change in shareholders' equity from transactions and other events and circumstances arising from non-shareholder sources. The Company's total comprehensive income (loss) is comprised of net income attributable to GEO, net income attributable to noncontrolling interests, foreign currency translation adjustments that arise from consolidating foreign operations that do not impact cash flows, net unrealized gains and/or losses on derivative instruments, and pension liability adjustments within shareholders' equity and comprehensive income (loss).
The components of accumulated other comprehensive income (loss) attributable to GEO within shareholders' equity are as follows:
|
|
Three Months Ended March 31, 2020
|
|
|
|
(In thousands)
|
|
|
|
Foreign currency
translation
adjustments,
net of tax
attributable
to The GEO
Group, Inc. (1)
|
|
|
Change
in fair
value of
derivatives,
net of tax
|
|
|
Pension
adjustments,
net of tax
|
|
|
Total
|
|
Balance, January 1, 2020
|
|
$
|
(12,314
|
)
|
|
$
|
(1,476
|
)
|
|
$
|
(6,545
|
)
|
|
$
|
(20,335
|
)
|
Current-period other comprehensive income (loss)
|
|
|
(8,759
|
)
|
|
|
(4,512
|
)
|
|
|
107
|
|
|
|
(13,164
|
)
|
Balance, March 31, 2020
|
|
$
|
(21,073
|
)
|
|
$
|
(5,988
|
)
|
|
$
|
(6,438
|
)
|
|
$
|
(33,499
|
)
|
|
(1)
|
The foreign currency translation related to noncontrolling interests was not significant at March 31, 2020.
|
13
Table of Contents
|
|
Three Months Ended March 31, 2019
|
|
|
|
(In thousands)
|
|
|
|
Foreign currency
translation
adjustments,
net of tax
attributable
to The GEO
Group, Inc. (1)
|
|
|
Change
in fair
value of
derivatives,
net of tax
|
|
|
Pension
adjustments,
net of tax
|
|
|
Total
|
|
Balance, January 1, 2019
|
|
|
(14,573
|
)
|
|
|
(5,746
|
)
|
|
|
(3,299
|
)
|
|
|
(23,618
|
)
|
Current-period comprehensive income (loss)
|
|
|
1,736
|
|
|
|
1,164
|
|
|
|
(648
|
)
|
|
|
2,252
|
|
Balance, March 31, 2019
|
|
|
(12,837
|
)
|
|
|
(4,582
|
)
|
|
|
(3,947
|
)
|
|
|
(21,366
|
)
|
|
(1)
|
The foreign currency translation related to noncontrolling interests was not significant at March 31, 2019.
|
7. EQUITY INCENTIVE PLANS
The Board adopted The GEO Group, Inc. 2018 Stock Incentive Plan (the "2018 Plan"), which was approved by the Company's shareholders on April 24, 2018. The 2018 Plan replaced the 2014 Stock Incentive Plan (the "2014 Plan"). As of the date the 2018 Plan was adopted, it provided for a reserve of 4,600,000 shares of common stock that may be issued pursuant to awards granted under the 2018 Plan. The Company filed a Form S-8 registration statement related to the 2018 Plan on May 11, 2018.
Stock Options
The Company uses a Black-Scholes option valuation model to estimate the fair value of each time-based or performance-based option awarded. For options granted during the three months ended March 31, 2020, the fair value was estimated using the following assumptions: (i) volatility of 41.41%; (ii) expected term of 5.0 years; (iii) risk free interest rate of 1.79%; and (iv) expected dividend yield of 13.11%. A summary of the activity of stock option awards issued and outstanding under Company plans was as follows for the three months ended March 31, 2020:
|
|
Shares
|
|
|
Wtd. Avg.
Exercise
Price
|
|
|
Wtd. Avg.
Remaining
Contractual
Term (years)
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Options outstanding at January 1, 2020
|
|
|
1,590
|
|
|
$
|
24.29
|
|
|
|
6.90
|
|
|
$
|
232
|
|
Options granted
|
|
|
480
|
|
|
|
14.64
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Options forfeited/canceled/expired
|
|
|
(23
|
)
|
|
|
25.68
|
|
|
|
|
|
|
|
|
|
Options outstanding at March 31, 2020
|
|
|
2,047
|
|
|
$
|
22.02
|
|
|
|
7.44
|
|
|
$
|
—
|
|
Options vested and expected to vest at March 31, 2020
|
|
|
1,909
|
|
|
$
|
22.30
|
|
|
|
7.30
|
|
|
$
|
—
|
|
Options exercisable at March 31, 2020
|
|
|
1,087
|
|
|
$
|
24.57
|
|
|
|
5.95
|
|
|
$
|
—
|
|
On March 1, 2020, the Company granted approximately 480,000 options to certain employees which had a per share grant date fair value of $1.59. For each of the three months ended March 31, 2020 and 2019, the amount of stock-based compensation expense related to stock options was $0.3 million. As of March 31, 2020, the Company had $2.3 million of unrecognized compensation costs related to non-vested stock option awards that are expected to be recognized over a weighted average period of 3.0 years.
Restricted Stock
Compensation expense for nonvested stock awards is recorded over the vesting period based on the fair value at the date of grant. Generally, the restricted stock awards vest in equal increments over either a three or four-year period. The fair value of restricted stock awards, which do not contain a market-based vesting condition, is determined using the closing price of the Company's common stock on the date of grant. The Company has historically issued share-based awards with service-based, performance-based and market-based vesting criteria.
14
Table of Contents
A summary of the activity of restricted stock outstanding is as follows for the three months ended March 31, 2020:
|
|
Shares
|
|
|
Wtd. Avg.
Grant Date
Fair Value
|
|
|
|
(in thousands)
|
|
|
|
|
|
Restricted stock outstanding at January 1, 2020
|
|
|
2,047
|
|
|
$
|
27.33
|
|
Granted
|
|
|
900
|
|
|
|
15.30
|
|
Vested
|
|
|
(732
|
)
|
|
|
27.81
|
|
Forfeited/canceled
|
|
|
(21
|
)
|
|
|
22.67
|
|
Restricted stock outstanding at March 31, 2020
|
|
|
2,194
|
|
|
$
|
20.59
|
|
On March 31, 2020, the Company granted approximately 900,000 shares of restricted stock to certain employees and executive officers. Of these awards, 360,000 are market and performance-based awards which will be forfeited if the Company does not achieve certain annual metrics during 2020, 2021 and 2022.
The vesting of these performance-based restricted stock grants are subject to the achievement by GEO of two annual performance metrics as follows: (i) up to 50% of the shares of restricted stock ("TSR Target Award") can vest at the end of a three year performance period if GEO meets certain total shareholder return ("TSR") performance targets, as compared to the total shareholder return of a peer group of companies, over a three year period from January 1, 2020 to December 31, 2022 and (ii) up to 50% of the shares of restricted stock ("ROCE Target Award") can vest at the end of a three year period if GEO meets certain return on capital employed ("ROCE") performance targets over a three year period from January 1, 2020 to December 31, 2022. These market and performance awards can vest at between 0% and 200% of the target awards for both metrics. The number of shares shown for the performance-based awards is based on the target awards for both metrics.
The metric related to ROCE is considered to be a performance condition. For share-based awards that contain a performance condition, the achievement of the targets must be probable before any share-based compensation expense is recorded. The Company reviews the likelihood of which the target in the range will be achieved and if deemed probable, compensation expense is recorded at that time. If subsequent to initial measurement there is a change in the estimate of the probability of meeting the performance condition, the effect of the change in the estimated quantity of awards expected to vest is recognized by cumulatively adjusting compensation expense. If ultimately the performance targets are not met, for any awards where vesting was previously deemed probable, previously recognized compensation expense will be reversed in the period in which vesting is no longer deemed probable. The fair value of these awards was determined based on the closing price of the Company's common stock on the date of grant.
The metric related to TSR is considered to be a market condition. For share-based awards that contain a market condition, the probability of satisfying the market condition must be considered in the estimate of grant-date fair value and previously recorded compensation expense is not reversed if the market condition is never met. The fair value of these awards was determined based on a Monte Carlo simulation, which calculates a range of possible outcomes and the probabilities that they will occur, using the following key assumptions: (i) volatility of 30.3%; (ii) beta of 1.1; and (iii) risk free rate of 0.85%.
For the three months ended March 31, 2020 and 2019, the Company recognized $9.5 million and $6.5 million, respectively, of compensation expense related to its restricted stock awards. As of March 31, 2020, the Company had $34.5 million of unrecognized compensation costs related to non-vested restricted stock awards, including non-vested restricted stock awards with performance-based and market-based vesting, that are expected to be recognized over a weighted average period of 2.6 years.
Employee Stock Purchase Plan
The Company previously adopted The GEO Group Inc. 2011 Employee Stock Purchase Plan (the “Plan or "ESPP”) which was approved by the Company's shareholders. The purpose of the Plan, which is qualified under Section 423 of the Internal Revenue Service Code of 1986, as amended, is to encourage stock ownership through payroll deductions by the employees of GEO and designated subsidiaries of GEO in order to increase their identification with the Company’s goals and secure a proprietary interest in the Company’s success. These deductions are used to purchase shares of the Company’s common stock at a 5% discount from the then current market price. The Company has made available up to 750,000 shares of its common stock, which were registered with the SEC on May 4, 2012, as amended on July 18, 2014, for sale to eligible employees under the Plan.
The Plan is considered to be non-compensatory. As such, there is no compensation expense required to be recognized. Share purchases under the Plan are made on the last day of each month. During the three months ended March 31, 2020, 10,325 shares of the Company's common stock were issued in connection with the Plan.
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Table of Contents
8. EARNINGS PER SHARE
Basic earnings per share of common stock is computed by dividing the net income attributable to The GEO Group, Inc. by the weighted average number of outstanding shares of common stock. The calculation of diluted earnings per share is similar to that of basic earnings per share except that the denominator includes dilutive common stock equivalents such as stock options and shares of restricted stock. Basic and diluted earnings per share were calculated for the three months ended March 31, 2020 and 2019 as follows (in thousands, except per share data):
|
|
Three Months Ended
|
|
|
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
|
Net income
|
|
$
|
25,121
|
|
|
$
|
40,649
|
|
|
Net loss attributable to noncontrolling interests
|
|
|
60
|
|
|
|
56
|
|
|
Net income attributable to The GEO Group, Inc.
|
|
|
25,181
|
|
|
|
40,705
|
|
|
Basic earnings per share attributable to The GEO Group,
Inc.:
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
119,394
|
|
|
|
118,774
|
|
|
Per share amount
|
|
$
|
0.21
|
|
|
$
|
0.34
|
|
|
Diluted earnings per share attributable to The GEO Group,
Inc.:
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
119,394
|
|
|
|
118,774
|
|
|
Dilutive effect of equity incentive plans
|
|
|
539
|
|
|
|
722
|
|
|
Weighted average shares assuming dilution
|
|
|
119,933
|
|
|
|
119,496
|
|
|
Per share amount
|
|
$
|
0.21
|
|
|
$
|
0.34
|
|
|
For the three months ended March 31, 2020, 1,626,201 weighted average shares of common stock underlying options were excluded from the computation of diluted earnings per share ("EPS") because the effect would be anti-dilutive. There were 967,784 common stock equivalents from restricted shares that were anti-dilutive.
For the three months ended March 31, 2019, 1,191,206 weighted average shares of common stock underlying options were excluded from the computation of diluted EPS because the effect would be anti-dilutive. There were 759,382 common stock equivalents from restricted shares that were anti-dilutive.
9. DERIVATIVE FINANCIAL INSTRUMENTS
The Company’s primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in interest rates. The Company measures its derivative financial instruments at fair value.
In August 2019, the Company entered into two interest rate swap agreements in the aggregate notional amount of $44.3 million to fix the interest rate on certain of its variable rate debt to 4.22%. The Company has designated these interest rate swaps as hedges against changes in the cash flows of two identical promissory notes (the "Notes") which are secured by loan agreements and mortgage and security agreements on certain real property and improvements. The Company has determined that the swaps have payment, expiration dates, and provisions that coincide with the terms of the Notes and are therefore considered to be effective cash flow hedges. Accordingly, the Company records the change in fair value of the interest rate swaps as accumulated other comprehensive income, net of applicable taxes. Total unrealized losses recorded in other comprehensive income, net of tax, related to these cash flow hedges was $4.5 million during the three months ended March 31, 2020. The total fair value of the swap liabilities as of March 31, 2020 was $7.6 million and is recorded as a component of Other Non-Current liabilities within the accompanying consolidated balance sheet. There was no material ineffectiveness for the period presented. The Company does not expect to enter into any transactions during the next twelve months which would result in reclassification into earnings or losses associated with these swaps currently reported in accumulated other comprehensive income (loss). Refer to Note 10 - Debt for additional information.
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Table of Contents
The Company’s Australian subsidiary had entered into interest rate swap agreements to fix the interest rate on its variable rate non-recourse debt related to a project in Ravenhall, a locality near Melbourne, Australia to 4.2%. The Company had determined that the swaps had payment, expiration dates, and provisions that coincided with the terms of the non-recourse debt and were therefore considered to be effective cash flow hedges. Accordingly, the Company recorded the change in the fair value of the interest rate swaps in accumulated other comprehensive income, net of applicable income taxes. On May 22, 2019, the Company refinanced the associated debt and terminated the swap agreements which resulted in the reclassification of $3.9 million into losses that were previously reported in accumulated other comprehensive income. Refer to Note 10 - Debt for additional information.
10. DEBT
Debt outstanding as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands):
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Senior Credit Facility:
|
|
|
|
|
|
|
|
|
Term loan
|
|
$
|
776,000
|
|
|
$
|
778,000
|
|
Unamortized discount on term loan
|
|
|
(2,135
|
)
|
|
|
(2,281
|
)
|
Unamortized debt issuance costs on term loan
|
|
|
(5,064
|
)
|
|
|
(5,410
|
)
|
Revolver
|
|
|
489,886
|
|
|
|
520,671
|
|
Total Senior Credit Facility
|
|
|
1,258,687
|
|
|
|
1,290,980
|
|
6.00% Senior Notes:
|
|
|
|
|
|
|
|
|
Notes Due in 2026
|
|
|
350,000
|
|
|
|
350,000
|
|
Unamortized debt issuance costs
|
|
|
(4,144
|
)
|
|
|
(4,282
|
)
|
Total 6.00% Senior Notes Due in 2026
|
|
|
345,856
|
|
|
|
345,718
|
|
5.875% Senior Notes:
|
|
|
|
|
|
|
|
|
Notes Due in 2024
|
|
|
250,000
|
|
|
|
250,000
|
|
Unamortized debt issuance costs
|
|
|
(2,418
|
)
|
|
|
(2,532
|
)
|
Total 5.875% Senior Notes Due in 2024
|
|
|
247,582
|
|
|
|
247,468
|
|
5.125% Senior Notes:
|
|
|
|
|
|
|
|
|
Notes Due in 2023
|
|
|
294,500
|
|
|
|
300,000
|
|
Unamortized debt issuance costs
|
|
|
(2,653
|
)
|
|
|
(2,876
|
)
|
Total 5.125% Senior Notes Due in 2023
|
|
|
291,847
|
|
|
|
297,124
|
|
5.875% Senior Notes:
|
|
|
|
|
|
|
|
|
Notes Due in 2022
|
|
|
193,958
|
|
|
|
193,958
|
|
Unamortized debt issuance costs
|
|
|
(1,195
|
)
|
|
|
(1,351
|
)
|
Total 5.875% Senior Notes Due in 2022
|
|
|
192,763
|
|
|
|
192,607
|
|
Non-Recourse Debt
|
|
|
288,074
|
|
|
|
328,178
|
|
Unamortized debt issuance costs on non-recourse debt
|
|
|
(4,549
|
)
|
|
|
(5,279
|
)
|
Unamortized discount on non-recourse debt
|
|
|
(66
|
)
|
|
|
(81
|
)
|
Total Non-Recourse Debt
|
|
|
283,459
|
|
|
|
322,818
|
|
Finance Lease Liabilities
|
|
|
4,179
|
|
|
|
4,570
|
|
Other debt
|
|
|
43,165
|
|
|
|
43,410
|
|
Total debt
|
|
|
2,667,538
|
|
|
|
2,744,695
|
|
Current portion of finance lease liabilities, long-term debt and
non-recourse debt
|
|
|
(23,625
|
)
|
|
|
(24,208
|
)
|
Finance Lease Liabilities, long-term portion
|
|
|
(2,563
|
)
|
|
|
(2,954
|
)
|
Non-Recourse Debt, long-term portion
|
|
|
(270,460
|
)
|
|
|
(309,236
|
)
|
Long-Term Debt
|
|
$
|
2,370,890
|
|
|
$
|
2,408,297
|
|
Amended Credit Agreement
On June 12, 2019, GEO entered into Amendment No. 2 to Third Amended and Restated Credit Agreement (the "Credit Agreement") by and among the refinancing lenders party thereto, the other lenders party thereto, GEO and GEO Corrections Holdings, Inc. and the administrative agent. Under the amendment, the maturity date of the revolver component of the Credit Agreement was extended to May 17, 2024. The borrowing capacity under the amended revolver remains at $900.0 million, and its pricing remains unchanged currently bearing interest at LIBOR plus 2.25%. As a result of the transaction, the Company incurred a loss on extinguishment of debt of $1.2 million related to certain unamortized deferred loan costs. Additionally, loan costs of $4.7 million were incurred and capitalized in connection with the transaction.
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Table of Contents
The Credit Agreement evidences a credit facility (the "Credit Facility") consisting of a $792.0 million term loan bearing interest at LIBOR plus 2.00% (with a LIBOR floor of 0.75%), and a $900.0 million revolver initially bearing interest at LIBOR plus 2.25% (with no LIBOR floor) together with AUD275 million available solely for the issuance of financial letters of credit and performance letters of credit, in each case denominated in Australian Dollars under the Australian Dollar Letter of Credit Facility (the "Australian LC Facility"). As of March 31, 2020, there were no letters of credit issued under the Australian LC Facility. Amounts to be borrowed by GEO under the Credit Agreement are subject to the satisfaction of customary conditions to borrowing. The term loan component is scheduled to mature on March 23, 2024. The revolving credit commitment component is scheduled to mature on May 17, 2024. The Credit Agreement also has an accordion feature of $450.0 million, subject to lender demand and prevailing market conditions and satisfying the relevant borrowing conditions.
The Credit Agreement contains certain customary representations and warranties, and certain customary covenants that restrict GEO’s ability to, among other things (i) create, incur or assume any indebtedness, (ii) create, incur, assume or permit liens, (iii) make loans and investments, (iv) engage in mergers, acquisitions and asset sales, (v) make certain restricted payments, (vi) issue, sell or otherwise dispose of capital stock, (vii) engage in transactions with affiliates, (viii) allow the total leverage ratio to exceed 6.25 to 1.00, allow the senior secured leverage ratio to exceed 3.50 to 1.00, or allow the interest coverage ratio to be less than 3.00 to 1.00, (ix) cancel, forgive, make any voluntary or optional payment or prepayment on, or redeem or acquire for value any senior notes, except as permitted, (x) alter the business GEO conducts, and (xi) materially impair GEO’s lenders’ security interests in the collateral for its loans.
Events of default under the Credit Agreement include, but are not limited to, (i) GEO’s failure to pay principal or interest when due, (ii) GEO’s material breach of any representation or warranty, (iii) covenant defaults, (iv) liquidation, reorganization or other relief relating to bankruptcy or insolvency, (v) cross default under certain other material indebtedness, (vi) unsatisfied final judgments over a specified threshold, (vii) certain material environmental liability claims asserted against GEO, and (viii) a change in control.
All of the obligations under the Credit Agreement are unconditionally guaranteed by certain domestic subsidiaries of GEO and the Credit Agreement and the related guarantees are secured by a perfected first-priority pledge of substantially all of GEO’s present and future tangible and intangible domestic assets and all present and future tangible and intangible domestic assets of each guarantor, including but not limited to a first-priority pledge of all of the outstanding capital stock owned by GEO and each guarantor in their domestic subsidiaries.
GEO Australasia Holdings Pty Ltd, GEO Australasia Finance Holdings Pty Ltd as trustee for the GEO Australasia Finance Holding Trust, and together with GEO Australasia Holdings, collectively ("the Australian Borrowers") are wholly owned foreign subsidiaries of GEO. GEO has designated each of the Australian Borrowers as restricted subsidiaries under the Credit Agreement. However, the Australian Borrowers are not obligated to pay or perform any obligations under the Credit Agreement other than their own obligations as Australian Borrowers under the Credit Agreement. The Australian Borrowers do not pledge any of their assets to secure any obligations under the Credit Agreement.
On August 18, 2016, the Company executed a Letter of Offer providing for a bank guarantee line and bank guarantee/standby sub-facility in an aggregate amount of approximately AUD58 million, or $35.6 million, based on exchange rates in effect as of March 31, 2020 (collectively, the “Bank Guarantee Facility”). The Bank Guarantee Facility allows GEO to provide letters of credit to assure performance of certain obligations of its wholly owned subsidiary relating to its correctional facility in Ravenhall, located near Melbourne, Australia. The Bank Guarantee Facility is unsecured. The issuance of letters of credit under the Bank Guarantee Facility is subject to the satisfaction of the conditions precedent specified in the Letter of Offer. Letters of credit issued under the bank guarantee lines are due on demand and letters of credit issued under the bank guarantee/standby sub-facility cannot have a duration exceeding twelve months. The Bank Guarantee Facility may be terminated by the lender on 90 days written notice. As of March 31, 2020, there was AUD58 million in letters of credit issued under the Bank Guarantee Facility.
As of March 31, 2020, the Company had approximately $776.0 million in aggregate borrowings outstanding under its term loan, approximately $489.9 million in borrowings under its revolver, and approximately $61.7 million in letters of credit which left approximately $348.4 million in additional borrowing capacity under the Revolver. The weighted average interest rate on outstanding borrowings under the Credit Agreement as of March 31, 2020 was 3.08%.
6.00% Senior Notes due 2026
Interest on the 6.00% Senior Notes accrues at the stated rate. The Company pays interest semi-annually in arrears on April 15 and October 15 of each year. On or after April 15, 2019, the Company may, at its option, redeem all or part of the 6.00% Senior Notes at the redemption prices set forth in the indenture governing the 6.00% Senior Notes. The indenture contains certain covenants, including limitations and restrictions on the Company and its subsidiary guarantors. Refer to Note 15- Condensed Consolidating Financial Information.
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Table of Contents
5.875% Senior Notes due 2024
Interest on the 5.875% Senior Notes due 2024 accrues at the stated rate. The Company pays interest semi-annually in arrears on April 15 and October 15 of each year. On or after October 15, 2019, the Company may, at its option, redeem all or part of the 5.875% Senior Notes due 2024 at the redemption prices set forth in the indenture governing the 5.875% Senior Notes due 2024. The indenture contains certain covenants, including limitations and restrictions on the Company and its subsidiary guarantors. Refer to Note 15- Condensed Consolidating Financial Information.
5.125% Senior Notes due 2023
Interest on the 5.125% Senior Notes accrues at the stated rate. The Company pays interest semi-annually in arrears on April 1 and October 1 of each year. On or after April 1, 2018, the Company may, at its option, redeem all or part of the 5.125% Senior Notes at the redemption prices set forth in the indenture governing the 5.125% Senior Notes. The indenture contains certain covenants, including limitations and restrictions on the Company and its subsidiary guarantors. Refer to Note 15- Condensed Consolidating Financial Information.
5.875% Senior Notes due 2022
Interest on the 5.875% Senior Notes due 2022 accrues at the stated rate. The Company pays interest semi-annually in arrears on January 15 and July 15 of each year. On or after January 15, 2017, the Company may, at its option, redeem all or part of the 5.875% Senior Notes due 2022 at the redemption prices set forth in the indenture governing the 5.875% Senior Notes due 2022. The indenture contains certain covenants, including limitations and restrictions on the Company and its subsidiary guarantors. Refer to Note 15- Condensed Consolidating Financial Information.
Debt Repurchases
On August 16, 2019, the Company's Board of Directors authorized the Company to repurchase and/or retire a portion of the 6.00% Senior Notes due 2026, the 5.875% Senior Notes due 2024, the 5.125% Senior Notes due 2023, the 5.875% Senior Notes due 2022 (collectively the "GEO Senior Notes") and the Company's term loan under its Amended Credit Agreement through cash purchases, in open market purchases, privately negotiated transactions, or otherwise, up to an aggregate maximum of $100.0 million, subject to certain limitations through December 31, 2020.
During 2019, the Company repurchased approximately $56.0 million in aggregate principal amount of its 5.875% Senior Notes due 2022 at a weighted average price of 97.55% for a total cost of $54.7 million. As a result of these repurchases, the Company recognized a net gain on extinguishment of debt of $0.3 million.
During the first quarter of 2020, the Company repurchased approximately $5.5 million in aggregate principal amount of its 5.125% Senior Notes due 2023 at a weighted average price of 70.68% for a total cost of $3.9 million. As a result of these repurchases, the Company recognized a net gain on extinguishment of debt of $1.6 million.
Non-Recourse Debt
Northwest ICE Processing Center
The remaining balance of the original debt service requirement under the $54.4 million note payable ("2011 Revenue Bonds") to WEDFA is $15.7 million, of which $7.7 million is classified as current in the accompanying consolidated balance sheet as of March 31, 2020. The payment of principal and interest on the 2011 Revenue Bonds issued by WEDFA is non-recourse to GEO. The 2011 Revenue Bonds will mature in October 2021 with a fixed coupon rate of 5.25%.
As of March 31, 2020, included in current restricted cash and cash equivalents is $4.7 million of funds held in trust for debt service and other reserves with respect to the above mentioned note payable to WEDFA.
Australia - Ravenhall
In connection with a design and build project agreement with the State of Victoria, in September 2014, the Company entered into a syndicated facility agreement (the "Construction Facility") to provide debt financing for construction of the project. The Construction Facility provided for non-recourse funding up to AUD791 million, or approximately $485.8 million, based on exchange rates as of March 31, 2020. In accordance with the terms of the contract, upon completion and commercial acceptance of the project, the State made a lump sum payment of AUD310 million, or approximately $190.4 million, based on exchange rates as of March 31, 2020. The term of the Construction Facility was through September 2019 and bore interest at a variable rate quoted by certain Australian banks plus 200 basis points. On May 22, 2019, the Company completed an offering of AUD462 million, or $283.5 million, based on exchange rates as of March 31, 2020, aggregate principal amount of non-recourse senior secured notes due 2042 (the "Non-Recourse Notes"). The amortizing Non-Recourse Notes were issued by Ravenhall Finance Co Pty Limited in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The Non-Recourse Notes were issued with a coupon and yield to maturity of 4.23% with a
19
Table of Contents
maturity date of March 31, 2042. The net proceeds from this offering were used to refinance the outstanding Construction Facility and to pay all related fees, costs and expenses associated with the transaction. As a result of the transaction, the Company incurred a $4.5 million loss on extinguishment of debt related to swap termination fees and unamortized deferred costs associated with the Construction Facility. Additionally, loan costs of approximately $7.5 million were incurred and capitalized in connection with the offering.
Other
In August 2019, the Company entered into two identical Notes in the aggregate amount of $44.3 million which are secured by loan agreements and mortgage and security agreements on certain real property and improvements. The terms of the Notes are through September 1, 2034 and bear interest at LIBOR plus 200 basis points and are payable in monthly installments plus interest. The Company has entered into interest rate swap agreements to fix the interest rate to 4.22%. Included in the balance at March 31, 2020 is $0.7 million of deferred loan costs incurred in the transaction. Refer to Note 9 - Derivative Financial Instruments for further information.
Guarantees
Australia
The Company has entered into a guarantee in connection with the operating performance of a facility in Australia. The obligation amounted to approximately AUD58 million, or $35.6 million, based on exchange rates as of March 31, 2020. The guarantee is secured by outstanding letters of credit under the Company's Revolver.
At March 31, 2020, the Company also had seven other letters of credit outstanding under separate international facilities relating to performance guarantees of its Australian subsidiary totaling $9.4 million.
Except as discussed above, the Company does not have any off balance sheet arrangements.
11. COMMITMENTS AND CONTINGENCIES
Litigation, Claims and Assessments
As previously reported and described in the Company's prior periodic reports, including most recently in its Form 10-K for the year ended December 31, 2019, former civil immigration detainees at the Aurora Immigration Processing 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 on the TVPA and unjust enrichment claims. 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 lawsuit 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 that the Company violated the TVPA and California's equivalent state statute. On September 27, 2019, the California plaintiff class filed a motion for class certification of both California-based and nationwide classes. The Company filed a response to this motion disputing the plaintiff class' right to broad class treatment of the claims at issue. On July 2, 2019, the Company filed a Motion for Summary Judgment in the Washington Attorney General’s Tacoma lawsuit based on the Company’s position that its legal defenses prevent the case from proceeding to trial. The federal court in Washington denied the Company's Motion for Summary Judgment on August 6, 2019. However, on August 20, 2019, the Department of Justice filed a Statement of Interest, which asked the Washington court to revisit its prior denial of the Company's intergovernmental immunity defense in the case. While the Washington court ultimately elected not to dismiss the case at the time, its order importantly declared that the Company's intergovernmental immunity defense was legally viable, to be ultimately determined at trial. Trial for the two Washington cases has been continued until sometime past June 2020. 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 lawsuits. The Company establishes accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the
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Table of Contents
amount of the loss can be reasonably estimated. However, the results of these claims or proceedings cannot be predicted with certainty, and an unfavorable resolution of one or more of these claims or proceedings could have a material adverse effect on the Company's financial condition, results of operations or cash flows. The Company's accruals for loss contingencies are reviewed quarterly and adjusted as additional information becomes available. The Company does not accrue for anticipated legal fees and costs but expenses those items as incurred.
On December 30, 2019, GEO filed a lawsuit for declaratory and injunctive relief challenging California’s newly enacted law - Assembly Bill 32 (AB-32) - which bars the federal government from engaging GEO or any other government contractors to provide detention services for illegal aliens. GEO’s claims, as described in the lawsuit, are grounded in authoritative legal doctrine that under the Constitution’s Supremacy Clause, the federal government is free from regulation by any state. By prohibiting federal detention facilities in California, the lawsuit argues AB-32 substantially interferes with the ability of U.S. Marshals Service (“USMS”) and ICE to carry out detention responsibilities for the federal government. Secondly, because AB-32 creates exceptions to the State when using GEO or any government contractors (to alleviate overcrowding), California’s statute unlawfully discriminates against the federal government. On December 31, 2019, GEO filed its motion for a preliminary injunction restraining California’s Governor and Attorney General from enforcing AB-32 against GEO’s detention facilities on behalf of USMS and ICE. The court granted the parties’ joint motion to reschedule the hearing to July 16, 2020.
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 previously 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 related to the assessment is approximately $19.1 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.
Commitments
The Company currently has contractual commitments for a number of projects using Company financing. The Company’s management estimates that the cost of these existing capital projects will be approximately $61 million of which $41 million was spent through the first three months of 2020. The Company estimates the remaining capital requirements related to these capital projects will be $20 million which will be spent through the remainder of 2020.
Idle Facilities
As of March 31, 2020, the Company was marketing approximately 1,000 vacant beds at two of its idle facilities to potential customers. The carrying values of these idle facilities, which are included in Property and Equipment, Net in the accompanying consolidated balance sheets, totaled $20.7 million as of March 31, 2020, excluding equipment and other assets that can be easily transferred for use at other facilities. There was no indication of impairment related to the Company's idle facilities at March 31, 2020.
21
Table of Contents
12. BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION
Operating and Reporting Segments
The Company conducts its business through four reportable business segments: the GEO Secure Services segment; the GEO Care segment; the International Services segment; and the Facility Construction & Design segment. The Company's segment revenues from external customers and a measure of segment profit are as follows (in thousands):
|
|
Three Months Ended
|
|
|
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
GEO Secure Services
|
|
$
|
398,109
|
|
|
$
|
390,510
|
|
|
GEO Care
|
|
|
144,463
|
|
|
|
153,843
|
|
|
International Services
|
|
|
56,850
|
|
|
|
64,224
|
|
|
Facility Construction & Design [1]
|
|
|
5,595
|
|
|
|
2,090
|
|
|
Total revenues
|
|
$
|
605,017
|
|
|
$
|
610,667
|
|
|
Operating income from segments:
|
|
|
|
|
|
|
|
|
|
GEO Secure Services
|
|
$
|
74,009
|
|
|
$
|
76,924
|
|
|
GEO Care
|
|
|
30,699
|
|
|
|
38,538
|
|
|
International Services
|
|
|
5,650
|
|
|
|
5,739
|
|
|
Facility Construction & Design [1]
|
|
|
10
|
|
|
|
—
|
|
|
Operating income from segments
|
|
$
|
110,368
|
|
|
$
|
121,201
|
|
|
General and Administrative Expenses
|
|
|
(53,782
|
)
|
|
|
(46,424
|
)
|
|
Total Operating Income
|
|
$
|
56,586
|
|
|
$
|
74,777
|
|
|
[1]
|
Facility Construction & Design revenues relate to an expansion project at the Company's managed-only 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 thousands):
|
|
Three Months Ended
|
|
|
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
|
Operating income from segments
|
|
$
|
110,368
|
|
|
$
|
121,201
|
|
|
Unallocated amounts:
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
(53,782
|
)
|
|
|
(46,424
|
)
|
|
Net interest expense
|
|
|
(28,742
|
)
|
|
|
(31,884
|
)
|
|
Gain on extinguishment of debt
|
|
|
1,563
|
|
|
|
—
|
|
|
Income before income taxes and equity in earnings of
affiliates
|
|
$
|
29,407
|
|
|
$
|
42,893
|
|
|
Equity in Earnings of Affiliates
Equity in earnings of affiliates includes the Company’s 50% owned joint ventures in SACS, located in South Africa, and GEOAmey, located in the United Kingdom. The Company's investments in these entities are accounted for under the equity method of accounting. The Company’s investments in these entities are presented as a component of Other Non-Current Assets in the accompanying consolidated balance sheets.
22
Table of Contents
The Company has recorded $1.0 million in earnings, net of tax, for SACS operations during the three months ended March 31, 2020, and $1.4 million in earnings, net of tax, for SACS operations during the three months ended March 31, 2019, which are included in equity in earnings of affiliates, net of income tax provision in the accompanying consolidated statements of operations. As of March 31, 2020 and December 31, 2019, the Company’s investment in SACS was $8.9 million and $12.3 million, respectively, and represents its share of cumulative reported earnings.
The Company has recorded $1.2 million in earnings, net of tax, for GEO Amey's operations during the three months ended March 31, 2020, and $1.2 million in earnings, net of tax, for GEO Amey's operations during the three months ended March 31, 2019, which are included in equity in earnings of affiliates, net of income tax provision in the accompanying consolidated statements of operations. As of March 31, 2020 and December 31, 2019, the Company’s investment in GEOAmey was $6.5 million and $5.7 million, respectively, and represents its share of cumulative reported earnings.
13. BENEFIT PLANS
The following table summarizes key information related to the Company’s pension plans and retirement agreements (in thousands):
|
|
Three Months Ended
March 31,
2020
|
|
|
Year Ended
December 31,
2019
|
|
Change in Projected Benefit Obligation
|
|
|
|
|
|
|
|
|
Projected benefit obligation, beginning of period
|
|
$
|
37,551
|
|
|
$
|
32,474
|
|
Service cost
|
|
|
313
|
|
|
|
998
|
|
Interest cost
|
|
|
326
|
|
|
|
1,393
|
|
Actuarial gain
|
|
|
—
|
|
|
|
3,449
|
|
Other reclassification [1]
|
|
|
(8,925
|
)
|
|
|
—
|
|
Benefits paid
|
|
|
(188
|
)
|
|
|
(763
|
)
|
Projected benefit obligation, end of period
|
|
$
|
29,077
|
|
|
$
|
37,551
|
|
Change in Plan Assets
|
|
|
|
|
|
|
|
|
Plan assets at fair value, beginning of period
|
|
$
|
—
|
|
|
$
|
—
|
|
Company contributions
|
|
|
188
|
|
|
|
763
|
|
Benefits paid
|
|
|
(188
|
)
|
|
|
(763
|
)
|
Plan assets at fair value, end of period
|
|
$
|
—
|
|
|
$
|
—
|
|
Unfunded Status of the Plan
|
|
$
|
29,077
|
|
|
$
|
37,551
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
2020
|
|
|
March 31,
2019
|
|
|
Components of Net Periodic Benefit Cost
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
313
|
|
|
$
|
250
|
|
|
Interest cost
|
|
|
326
|
|
|
|
348
|
|
|
Net loss
|
|
|
135
|
|
|
|
53
|
|
|
Net periodic pension cost
|
|
$
|
774
|
|
|
$
|
651
|
|
|
[1] The Company has a non-qualified deferred compensation agreement with its CEO. The agreement provided for a lump sum payment upon retirement, no sooner than age 55. As of March 31, 2020, the CEO had reached age 55 and was eligible to receive the payment upon retirement. If the Company’s CEO had retired as of March 31, 2020, the Company would have had to pay him approximately $8.9 million.
On February 26, 2020 (the "Effective Date"), the Company and its CEO entered into an amended and restated executive retirement agreement that amends and replaces the CEO’s prior executive retirement agreement discussed above.
The amended and restated executive retirement agreement provides that upon the CEO’s retirement from the Company, the Company will pay a lump sum amount equal to $8,925,065 (determined as of February 26, 2020) (the “Grandfathered Payment”) which will be paid in the form of the Company’s common stock. The Grandfathered Payment will be delayed for six months and a day following the effective date of the CEO’s termination of employment in compliance with Section 409A of the Internal Revenue Code of 1986, as amended.
Beginning on the Effective Date, an amount equal to the Grandfathered Payment shall be invested in the Company’s common stock (“GEO Shares”). The number of the Company’s shares of common stock as of the Effective Date shall be equal to the Grandfathered
23
Table of Contents
Payment divided by the closing price of the Company’s common stock on the Effective Date (rounded up to the nearest whole number of shares), which equals 553,665 shares of the Company’s common stock. Additional shares of the Company’s common stock will be credited with a value equal to any dividends declared and paid on the Company’s shares of common stock, calculated by reference to the closing price of the Company’s common stock on the payment date for such dividends (rounded up to the nearest whole number of shares).
The Company has established several trusts for the purpose of paying the retirement benefit pursuant to the amended and restated executive retirement agreement. The trusts shall be revocable “rabbi trusts” and the assets of the trusts shall be subject to the claims of the Company’s creditors in the event of the Company’s insolvency.
The Company repurchased shares of its outstanding common stock under its stock buyback program and contributed such shares to the trusts in order to fund the retirement benefit under the amended and restated executive retirement agreement. In accordance with Accounting Standards Codification (“ASC”) 710 – Compensation-General, the shares of common stock held in the rabbi trusts are classified as treasury stock. In addition, the amended and restated executive retirement agreement qualifies for equity accounting under ASC 710 and therefore, the fair value of the Grandfathered payment has been reclassified to stockholders’ equity as of March 31, 2020.
The long-term portion of the pension liability as of March 31, 2020 and December 31, 2019 was $28.7 million and $37.2 million, respectively, and is included in Other Non-Current Liabilities in the accompanying consolidated balance sheets.
24
Table of Contents
14. RECENT ACCOUNTING PRONOUNCEMENTS
The Company implemented the following accounting standards during the three months ended March 31, 2020:
In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820)" as a part of its disclosure framework project. The amendments in this update remove, modify and add certain disclosures primarily related to transfers between Level 1 and Level 2 of the fair value hierarchy, various disclosures related to Level 3 fair value measurements and investments in certain entities that calculate net asset value. The new standard was effective for the Company beginning January 1, 2020. The adoption of this standard did not have a material impact on the Company's financial position, results of operations or cash flows.
In June 2016, the FASB issued ASC No. 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments". The purpose of Update No. 2016-13 is to replace the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates. Update No. 2016-13 was effective for the Company beginning January 1, 2020. The adoption of this standard did not have a material impact on the Company's financial position, results of operations or cash flows.
The following accounting standards will be adopted in future periods:
In March 2020, the FASB issued ASU 2020-04, “Reference Reform Rate (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” to provide temporary optional expedients and exceptions to the contract modifications, hedge relationships and other transactions affected by reference rate reform if certain criteria are met. This ASU, which was effective upon issuance and may be applied through December 31, 2022, is applicable to all contracts and hedging relationships that reference the London Interbank Offered Rate or any other reference rate expected to be discontinued. The Company is currently evaluating the impact of reference rate reform and the potential application of this guidance.
In August 2018, the FASB issued ASU No. 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Topic 715.20)" as a part of its disclosure framework project. The amendments in this update remove, modify and add certain disclosures primarily related to amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, explanations for reasons for significant gains and losses related to changes in the benefit obligation for the period, and projected and accumulated benefit obligations. The new standard is effective for the Company beginning January 1, 2021. The adoption of this standard is not expected to have a material impact on the Company's financial position, results of operations or cash flows.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants and the SEC did not, or are not expected to, have a material effect on the Company's results of operations or financial position.
15. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
As of March 31, 2020, 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”);
|
25
Table of Contents
|
(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.
|
26
Table of Contents
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(dollars in thousands)
(unaudited)
|
|
For the Three Months Ended March 31, 2020
|
|
|
|
The GEO
Group, Inc.
|
|
|
Combined
Subsidiary
Guarantors
|
|
|
Combined
Non-
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenues
|
|
$
|
238,715
|
|
|
$
|
492,774
|
|
|
$
|
65,111
|
|
|
$
|
(191,583
|
)
|
|
$
|
605,017
|
|
Operating expenses
|
|
|
187,566
|
|
|
|
414,639
|
|
|
|
50,700
|
|
|
|
(191,583
|
)
|
|
|
461,322
|
|
Depreciation and amortization
|
|
|
7,816
|
|
|
|
24,574
|
|
|
|
937
|
|
|
|
—
|
|
|
|
33,327
|
|
General and administrative expenses
|
|
|
21,021
|
|
|
|
27,027
|
|
|
|
5,734
|
|
|
|
—
|
|
|
|
53,782
|
|
Operating income
|
|
|
22,312
|
|
|
|
26,534
|
|
|
|
7,740
|
|
|
|
—
|
|
|
|
56,586
|
|
Interest income
|
|
|
3,358
|
|
|
|
1,372
|
|
|
|
5,005
|
|
|
|
(4,297
|
)
|
|
|
5,438
|
|
Interest expense
|
|
|
(20,738
|
)
|
|
|
(13,616
|
)
|
|
|
(4,123
|
)
|
|
|
4,297
|
|
|
|
(34,180
|
)
|
Gain on extinguishment of debt
|
|
|
—
|
|
|
|
1,563
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,563
|
|
Income before income taxes and equity in earnings of
affiliates
|
|
|
4,932
|
|
|
|
15,853
|
|
|
|
8,622
|
|
|
|
—
|
|
|
|
29,407
|
|
Income tax provision
|
|
|
198
|
|
|
|
4,034
|
|
|
|
2,314
|
|
|
|
—
|
|
|
|
6,546
|
|
Equity in earnings of affiliates, net of income
tax provision
|
|
|
—
|
|
|
|
—
|
|
|
|
2,260
|
|
|
|
—
|
|
|
|
2,260
|
|
Income before equity in income of consolidated
subsidiaries
|
|
|
4,734
|
|
|
|
11,819
|
|
|
|
8,568
|
|
|
|
—
|
|
|
|
25,121
|
|
Income from consolidated subsidiaries, net of income
tax provision
|
|
|
20,387
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(20,387
|
)
|
|
|
—
|
|
Net income
|
|
|
25,121
|
|
|
|
11,819
|
|
|
|
8,568
|
|
|
|
(20,387
|
)
|
|
|
25,121
|
|
Net loss attributable to noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
60
|
|
|
|
—
|
|
|
|
60
|
|
Net income attributable to The GEO Group, Inc.
|
|
$
|
25,121
|
|
|
$
|
11,819
|
|
|
$
|
8,628
|
|
|
$
|
(20,387
|
)
|
|
$
|
25,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
25,121
|
|
|
$
|
11,819
|
|
|
$
|
8,568
|
|
|
$
|
(20,387
|
)
|
|
$
|
25,121
|
|
Other comprehensive income (loss), net of tax
|
|
|
(4,512
|
)
|
|
|
107
|
|
|
|
(8,807
|
)
|
|
|
—
|
|
|
|
(13,212
|
)
|
Total comprehensive income
|
|
$
|
20,609
|
|
|
$
|
11,926
|
|
|
$
|
(239
|
)
|
|
$
|
(20,387
|
)
|
|
$
|
11,909
|
|
Comprehensive loss attributable to noncontrolling
interests
|
|
|
—
|
|
|
|
—
|
|
|
|
108
|
|
|
|
—
|
|
|
|
108
|
|
Comprehensive income (loss) attributable to
The GEO Group, Inc.
|
|
$
|
20,609
|
|
|
$
|
11,926
|
|
|
$
|
(131
|
)
|
|
$
|
(20,387
|
)
|
|
$
|
12,017
|
|
27
Table of Contents
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
(dollars in thousands)
(unaudited)
|
|
For the Three Months Ended March 31, 2019
|
|
|
|
The GEO
Group, Inc.
|
|
|
Combined
Subsidiary
Guarantors
|
|
|
Combined
Non-
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenues
|
|
$
|
228,382
|
|
|
$
|
494,890
|
|
|
$
|
68,968
|
|
|
$
|
(181,573
|
)
|
|
$
|
610,667
|
|
Operating expenses
|
|
|
171,516
|
|
|
|
412,453
|
|
|
|
54,601
|
|
|
|
(181,573
|
)
|
|
|
456,997
|
|
Depreciation and amortization
|
|
|
7,419
|
|
|
|
24,185
|
|
|
|
865
|
|
|
|
—
|
|
|
|
32,469
|
|
General and administrative expenses
|
|
|
17,200
|
|
|
|
24,030
|
|
|
|
5,194
|
|
|
|
—
|
|
|
|
46,424
|
|
Operating income
|
|
|
32,247
|
|
|
|
34,222
|
|
|
|
8,308
|
|
|
|
—
|
|
|
|
74,777
|
|
Interest income
|
|
|
3,478
|
|
|
|
1,335
|
|
|
|
8,198
|
|
|
|
(4,615
|
)
|
|
|
8,396
|
|
Interest expense
|
|
|
(23,296
|
)
|
|
|
(13,847
|
)
|
|
|
(7,752
|
)
|
|
|
4,615
|
|
|
|
(40,280
|
)
|
Income before income taxes and equity in
earnings of affiliates
|
|
|
12,429
|
|
|
|
21,710
|
|
|
|
8,754
|
|
|
|
—
|
|
|
|
42,893
|
|
Income tax provision
|
|
|
289
|
|
|
|
2,379
|
|
|
|
2,172
|
|
|
|
—
|
|
|
|
4,840
|
|
Equity in earnings of affiliates, net of income
tax provision
|
|
|
—
|
|
|
|
—
|
|
|
|
2,596
|
|
|
|
—
|
|
|
|
2,596
|
|
Income before equity in income of consolidated
subsidiaries
|
|
|
12,140
|
|
|
|
19,331
|
|
|
|
9,178
|
|
|
|
—
|
|
|
|
40,649
|
|
Income from consolidated subsidiaries, net of income
tax provision
|
|
|
28,509
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(28,509
|
)
|
|
|
—
|
|
Net income
|
|
|
40,649
|
|
|
|
19,331
|
|
|
|
9,178
|
|
|
|
(28,509
|
)
|
|
|
40,649
|
|
Net loss attributable to noncontrolling interests
|
|
|
—
|
|
|
|
—
|
|
|
|
56
|
|
|
|
—
|
|
|
|
56
|
|
Net income attributable to The GEO Group, Inc.
|
|
$
|
40,649
|
|
|
$
|
19,331
|
|
|
$
|
9,234
|
|
|
$
|
(28,509
|
)
|
|
$
|
40,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
40,649
|
|
|
$
|
19,331
|
|
|
$
|
9,178
|
|
|
$
|
(28,509
|
)
|
|
$
|
40,649
|
|
Other comprehensive income (loss), net of tax
|
|
|
—
|
|
|
|
(648
|
)
|
|
|
2,900
|
|
|
|
—
|
|
|
|
2,252
|
|
Total comprehensive income
|
|
$
|
40,649
|
|
|
$
|
18,683
|
|
|
$
|
12,078
|
|
|
$
|
(28,509
|
)
|
|
$
|
42,901
|
|
Comprehensive loss attributable to noncontrolling
interests
|
|
|
—
|
|
|
|
—
|
|
|
|
56
|
|
|
|
—
|
|
|
|
56
|
|
Comprehensive income attributable to
The GEO Group, Inc.
|
|
$
|
40,649
|
|
|
$
|
18,683
|
|
|
$
|
12,134
|
|
|
$
|
(28,509
|
)
|
|
$
|
42,957
|
|
28
Table of Contents
CONDENSED CONSOLIDATING BALANCE SHEET
(dollars in thousands)
(unaudited)
|
|
As of March 31, 2020
|
|
|
|
The GEO
Group, Inc.
|
|
|
Combined
Subsidiary
Guarantors
|
|
|
Combined
Non-
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
8,673
|
|
|
$
|
934
|
|
|
$
|
22,807
|
|
|
$
|
—
|
|
|
$
|
32,414
|
|
Restricted cash and cash equivalents
|
|
|
—
|
|
|
|
—
|
|
|
|
27,865
|
|
|
|
—
|
|
|
|
27,865
|
|
Accounts receivable, less allowance for doubtful
accounts
|
|
|
152,001
|
|
|
|
187,539
|
|
|
|
32,794
|
|
|
|
3,119
|
|
|
|
375,453
|
|
Contract receivable, current portion
|
|
|
—
|
|
|
|
—
|
|
|
|
4,686
|
|
|
|
—
|
|
|
|
4,686
|
|
Prepaid expenses and other current assets
|
|
|
1,667
|
|
|
|
28,377
|
|
|
|
8,179
|
|
|
|
(2,115
|
)
|
|
|
36,108
|
|
Total current assets
|
|
|
162,341
|
|
|
|
216,850
|
|
|
|
96,331
|
|
|
|
1,004
|
|
|
|
476,526
|
|
Restricted Cash and Investments
|
|
|
—
|
|
|
|
25,143
|
|
|
|
2,128
|
|
|
|
—
|
|
|
|
27,271
|
|
Property and Equipment, Net
|
|
|
848,926
|
|
|
|
1,212,008
|
|
|
|
81,596
|
|
|
|
—
|
|
|
|
2,142,530
|
|
Assets Held for Sale
|
|
|
705
|
|
|
|
3,700
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,405
|
|
Contract Receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
319,819
|
|
|
|
—
|
|
|
|
319,819
|
|
Operating Lease Right-of-Use Assets, Net
|
|
|
20,641
|
|
|
|
102,165
|
|
|
|
659
|
|
|
|
—
|
|
|
|
123,465
|
|
Intercompany Receivable
|
|
|
961,145
|
|
|
|
242,777
|
|
|
|
14,714
|
|
|
|
(1,218,636
|
)
|
|
|
—
|
|
Deferred Income Tax Assets
|
|
|
—
|
|
|
|
35,585
|
|
|
|
693
|
|
|
|
—
|
|
|
|
36,278
|
|
Goodwill
|
|
|
—
|
|
|
|
775,954
|
|
|
|
352
|
|
|
|
—
|
|
|
|
776,306
|
|
Intangible Assets, Net
|
|
|
—
|
|
|
|
203,995
|
|
|
|
392
|
|
|
|
—
|
|
|
|
204,387
|
|
Investment in Subsidiaries
|
|
|
1,454,238
|
|
|
|
573,816
|
|
|
|
2,190
|
|
|
|
(2,030,244
|
)
|
|
|
—
|
|
Other Non-Current Assets
|
|
|
17,698
|
|
|
|
120,610
|
|
|
|
16,080
|
|
|
|
(77,528
|
)
|
|
|
76,860
|
|
Total Assets
|
|
$
|
3,465,694
|
|
|
$
|
3,512,603
|
|
|
$
|
534,954
|
|
|
$
|
(3,325,404
|
)
|
|
$
|
4,187,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
11,690
|
|
|
$
|
78,891
|
|
|
$
|
2,306
|
|
|
$
|
—
|
|
|
$
|
92,887
|
|
Accrued payroll and related taxes
|
|
|
—
|
|
|
|
46,984
|
|
|
|
16,021
|
|
|
|
—
|
|
|
|
63,005
|
|
Accrued expenses and other current liabilities
|
|
|
38,496
|
|
|
|
115,317
|
|
|
|
25,440
|
|
|
|
(419
|
)
|
|
|
178,834
|
|
Operating lease liabilities, current portion
|
|
|
5,328
|
|
|
|
21,554
|
|
|
|
86
|
|
|
|
—
|
|
|
|
26,968
|
|
Current portion of finance lease liabilities, long-term
debt and non-recourse debt
|
|
|
8,000
|
|
|
|
2,626
|
|
|
|
12,999
|
|
|
|
—
|
|
|
|
23,625
|
|
Total current liabilities
|
|
|
63,514
|
|
|
|
265,372
|
|
|
|
56,852
|
|
|
|
(419
|
)
|
|
|
385,319
|
|
Deferred Income Tax Liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
19,254
|
|
|
|
—
|
|
|
|
19,254
|
|
Intercompany Payable
|
|
|
105,255
|
|
|
|
1,087,981
|
|
|
|
23,976
|
|
|
|
(1,217,212
|
)
|
|
|
—
|
|
Other Non-Current Liabilities
|
|
|
4,715
|
|
|
|
155,110
|
|
|
|
294
|
|
|
|
(77,528
|
)
|
|
|
82,591
|
|
Operating lease Liabilities
|
|
|
15,860
|
|
|
|
82,881
|
|
|
|
573
|
|
|
|
—
|
|
|
|
99,314
|
|
Finance Lease Liabilities
|
|
|
—
|
|
|
|
2,563
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,563
|
|
Long-Term Debt
|
|
|
2,318,004
|
|
|
|
—
|
|
|
|
52,886
|
|
|
|
—
|
|
|
|
2,370,890
|
|
Non-Recourse Debt
|
|
|
—
|
|
|
|
—
|
|
|
|
270,460
|
|
|
|
—
|
|
|
|
270,460
|
|
Commitments & Contingencies and Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Shareholders' Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
The GEO Group, Inc. Shareholders' Equity
|
|
|
958,346
|
|
|
|
1,918,696
|
|
|
|
111,549
|
|
|
|
(2,030,245
|
)
|
|
|
958,346
|
|
Noncontrolling Interests
|
|
|
—
|
|
|
|
—
|
|
|
|
(890
|
)
|
|
|
—
|
|
|
|
(890
|
)
|
Total Shareholders’ Equity
|
|
|
958,346
|
|
|
|
1,918,696
|
|
|
|
110,659
|
|
|
|
(2,030,245
|
)
|
|
|
957,456
|
|
Total Liabilities and Shareholders' Equity
|
|
$
|
3,465,694
|
|
|
$
|
3,512,603
|
|
|
$
|
534,954
|
|
|
$
|
(3,325,404
|
)
|
|
$
|
4,187,847
|
|
29
Table of Contents
CONDENSED CONSOLIDATING BALANCE SHEET
(dollars in thousands)
(unaudited)
|
|
As of December 31, 2019
|
|
|
|
The GEO
Group, Inc.
|
|
|
Combined
Subsidiary
Guarantors
|
|
|
Combined
Non-
Guarantor
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
9,840
|
|
|
$
|
—
|
|
|
$
|
22,623
|
|
|
$
|
—
|
|
|
$
|
32,463
|
|
Restricted cash and cash equivalents
|
|
|
—
|
|
|
|
—
|
|
|
|
32,418
|
|
|
|
—
|
|
|
|
32,418
|
|
Accounts receivable, less allowance for doubtful
accounts
|
|
|
167,769
|
|
|
|
218,920
|
|
|
|
41,175
|
|
|
|
3,118
|
|
|
|
430,982
|
|
Contract receivable, current portion
|
|
|
—
|
|
|
|
—
|
|
|
|
11,199
|
|
|
|
—
|
|
|
|
11,199
|
|
Prepaid expenses and other current assets
|
|
|
1,273
|
|
|
|
32,187
|
|
|
|
9,315
|
|
|
|
(2,059
|
)
|
|
|
40,716
|
|
Total current assets
|
|
|
178,882
|
|
|
|
251,107
|
|
|
|
116,730
|
|
|
|
1,059
|
|
|
|
547,778
|
|
Restricted Cash and Investments
|
|
|
—
|
|
|
|
28,648
|
|
|
|
2,275
|
|
|
|
—
|
|
|
|
30,923
|
|
Property and Equipment, Net
|
|
|
846,297
|
|
|
|
1,214,697
|
|
|
|
83,728
|
|
|
|
—
|
|
|
|
2,144,722
|
|
Right-of-Use Assets Operating Leases
|
|
|
21,995
|
|
|
|
98,654
|
|
|
|
878
|
|
|
|
|
|
|
|
121,527
|
|
Assets Held for Sale
|
|
|
705
|
|
|
|
5,354
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,059
|
|
Contract Receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
360,647
|
|
|
|
|
|
|
|
360,647
|
|
Intercompany Receivable
|
|
|
978,337
|
|
|
|
238,680
|
|
|
|
17,050
|
|
|
|
(1,234,067
|
)
|
|
|
—
|
|
Deferred Income Tax Assets
|
|
|
—
|
|
|
|
35,584
|
|
|
|
694
|
|
|
|
—
|
|
|
|
36,278
|
|
Goodwill
|
|
|
—
|
|
|
|
775,953
|
|
|
|
403
|
|
|
|
—
|
|
|
|
776,356
|
|
Intangible Assets, Net
|
|
|
—
|
|
|
|
209,554
|
|
|
|
516
|
|
|
|
—
|
|
|
|
210,070
|
|
Investment in Subsidiaries
|
|
|
1,484,930
|
|
|
|
573,816
|
|
|
|
2,189
|
|
|
|
(2,060,935
|
)
|
|
|
—
|
|
Other Non-Current Assets
|
|
|
18,329
|
|
|
|
123,797
|
|
|
|
18,853
|
|
|
|
(77,805
|
)
|
|
|
83,174
|
|
Total Assets
|
|
$
|
3,529,475
|
|
|
$
|
3,555,844
|
|
|
$
|
603,963
|
|
|
$
|
(3,371,748
|
)
|
|
$
|
4,317,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
16,690
|
|
|
$
|
76,631
|
|
|
$
|
5,911
|
|
|
$
|
—
|
|
|
$
|
99,232
|
|
Accrued payroll and related taxes
|
|
|
—
|
|
|
|
38,243
|
|
|
|
16,429
|
|
|
|
—
|
|
|
|
54,672
|
|
Accrued expenses and other current liabilities
|
|
|
32,175
|
|
|
|
131,031
|
|
|
|
28,765
|
|
|
|
(363
|
)
|
|
|
191,608
|
|
Operating lease liabilities, current portion
|
|
|
5,232
|
|
|
|
20,777
|
|
|
|
199
|
|
|
|
|
|
|
|
26,208
|
|
Current portion of finance lease liabilities, long-term
debt and non-recourse debt
|
|
|
8,000
|
|
|
|
2,626
|
|
|
|
13,582
|
|
|
|
—
|
|
|
|
24,208
|
|
Total current liabilities
|
|
|
62,097
|
|
|
|
269,308
|
|
|
|
64,886
|
|
|
|
(363
|
)
|
|
|
395,928
|
|
Deferred Income Tax Liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
19,254
|
|
|
|
—
|
|
|
|
19,254
|
|
Intercompany Payable
|
|
|
106,029
|
|
|
|
1,100,299
|
|
|
|
26,316
|
|
|
|
(1,232,644
|
)
|
|
|
—
|
|
Other Non-Current Liabilities
|
|
|
3,572
|
|
|
|
162,026
|
|
|
|
733
|
|
|
|
(77,805
|
)
|
|
|
88,526
|
|
Operating Lease Liabilities
|
|
|
17,321
|
|
|
|
79,290
|
|
|
|
680
|
|
|
|
|
|
|
|
97,291
|
|
Finance Lease Liabilities
|
|
|
—
|
|
|
|
2,954
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,954
|
|
Long-Term Debt
|
|
|
2,343,626
|
|
|
|
—
|
|
|
|
64,671
|
|
|
|
—
|
|
|
|
2,408,297
|
|
Non-Recourse Debt
|
|
|
—
|
|
|
|
—
|
|
|
|
309,236
|
|
|
|
—
|
|
|
|
309,236
|
|
Commitments & Contingencies and Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Shareholders' Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
The GEO Group, Inc. Shareholders' Equity
|
|
|
996,830
|
|
|
|
1,941,967
|
|
|
|
118,969
|
|
|
|
(2,060,936
|
)
|
|
|
996,830
|
|
Noncontrolling Interests
|
|
|
—
|
|
|
|
—
|
|
|
|
(782
|
)
|
|
|
—
|
|
|
|
(782
|
)
|
Total Shareholders’ Equity
|
|
|
996,830
|
|
|
|
1,941,967
|
|
|
|
118,187
|
|
|
|
(2,060,936
|
)
|
|
|
996,048
|
|
Total Liabilities and Shareholders' Equity
|
|
$
|
3,529,475
|
|
|
$
|
3,555,844
|
|
|
$
|
603,963
|
|
|
$
|
(3,371,748
|
)
|
|
$
|
4,317,534
|
|
30
Table of Contents
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(dollars in thousands)
(unaudited)
|
|
For the Three Months Ended March 31, 2020
|
|
|
|
The GEO
Group, Inc.
|
|
|
Combined
Subsidiary
Guarantors
|
|
|
Combined
Non-
Guarantor
Subsidiaries
|
|
|
Consolidated
|
|
Cash Flow from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
105,094
|
|
|
$
|
14,512
|
|
|
$
|
8,653
|
|
|
$
|
128,259
|
|
Cash Flow from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of property and equipment
|
|
|
—
|
|
|
|
264
|
|
|
|
—
|
|
|
|
264
|
|
Proceeds from sale of assets held for sale
|
|
|
—
|
|
|
|
1,300
|
|
|
|
—
|
|
|
|
1,300
|
|
Change in restricted investments
|
|
|
—
|
|
|
|
3,363
|
|
|
|
—
|
|
|
|
3,363
|
|
Capital expenditures
|
|
|
(11,583
|
)
|
|
|
(18,647
|
)
|
|
|
(422
|
)
|
|
|
(30,652
|
)
|
Net cash used in investing activities
|
|
|
(11,583
|
)
|
|
|
(13,720
|
)
|
|
|
(422
|
)
|
|
|
(25,725
|
)
|
Cash Flow from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt
|
|
|
96,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
96,000
|
|
Payments on long-term debt
|
|
|
(121,485
|
)
|
|
|
—
|
|
|
|
(4,020
|
)
|
|
|
(125,505
|
)
|
Payments on non-recourse debt
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,362
|
)
|
|
|
(1,362
|
)
|
Taxes paid related to net share settlements of equity awards
|
|
|
(2,632
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,632
|
)
|
Proceeds from issuance of common stock in connection
with ESPP
|
|
|
150
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150
|
|
Payment for repurchases of common stock
|
|
|
(9,009
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(9,009
|
)
|
Dividends paid
|
|
|
(57,703
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(57,703
|
)
|
Net cash used in financing activities
|
|
|
(94,679
|
)
|
|
|
—
|
|
|
|
(5,382
|
)
|
|
|
(100,061
|
)
|
Effect of Exchange Rate Changes on Cash, Cash Equivalents
and Restricted Cash and Cash Equivalents
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,364
|
)
|
|
|
(7,364
|
)
|
Net (Decrease) Increase in Cash. Cash Equivalents and
Restricted Cash and Cash Equivalents
|
|
|
(1,168
|
)
|
|
|
792
|
|
|
|
(4,515
|
)
|
|
|
(4,891
|
)
|
Cash, Cash Equivalents and Restricted Cash and Cash
Equivalents, beginning of period
|
|
|
9,840
|
|
|
|
—
|
|
|
|
57,632
|
|
|
|
67,472
|
|
Cash, Cash Equivalents and Restricted Cash and Cash
Equivalents, end of period
|
|
$
|
8,672
|
|
|
$
|
792
|
|
|
$
|
53,117
|
|
|
$
|
62,581
|
|
31
Table of Contents
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(dollars in thousands)
(unaudited)
|
|
For the Three Months Ended March 31, 2019
|
|
|
|
The GEO
Group, Inc.
|
|
|
Combined
Subsidiary
Guarantors
|
|
|
Combined
Non-
Guarantor
Subsidiaries
|
|
|
Consolidated
|
|
Cash Flow from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
14,354
|
|
|
$
|
20,879
|
|
|
$
|
63,778
|
|
|
$
|
99,011
|
|
Cash Flow from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of property and equipment
|
|
|
—
|
|
|
|
274
|
|
|
|
—
|
|
|
|
274
|
|
Proceeds from sale of assets held for sale
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
Insurance proceeds - damaged property
|
|
|
—
|
|
|
|
2,503
|
|
|
|
—
|
|
|
|
2,503
|
|
Change in restricted investments
|
|
|
—
|
|
|
|
(4,062
|
)
|
|
|
—
|
|
|
|
(4,062
|
)
|
Capital expenditures
|
|
|
(6,608
|
)
|
|
|
(21,452
|
)
|
|
|
(24
|
)
|
|
|
(28,084
|
)
|
Net cash used in investing activities
|
|
|
(6,608
|
)
|
|
|
(22,737
|
)
|
|
|
(24
|
)
|
|
|
(29,369
|
)
|
Cash Flow from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt
|
|
|
130,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
130,000
|
|
Payments on long-term debt
|
|
|
(96,926
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(96,926
|
)
|
Payments on non-recourse debt
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,089
|
)
|
|
|
(2,089
|
)
|
Taxes paid related to net share settlements of equity awards
|
|
|
(4,172
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,172
|
)
|
Proceeds from issuance of common stock in connection
with ESPP
|
|
|
124
|
|
|
|
—
|
|
|
|
—
|
|
|
|
124
|
|
Proceeds from stock options exercised
|
|
|
333
|
|
|
|
—
|
|
|
|
—
|
|
|
|
333
|
|
Dividends paid
|
|
|
(57,945
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(57,945
|
)
|
Net cash used in financing activities
|
|
|
(28,586
|
)
|
|
|
—
|
|
|
|
(2,089
|
)
|
|
|
(30,675
|
)
|
Effect of Exchange Rate Changes on Cash, Cash Equivalents
and Restricted Cash and Cash Equivalents
|
|
|
—
|
|
|
|
—
|
|
|
|
366
|
|
|
|
366
|
|
Net (Decrease) Increase in Cash, Cash Equivalents and
Restricted Cash and Cash Equivalents
|
|
|
(20,840
|
)
|
|
|
(1,858
|
)
|
|
|
62,031
|
|
|
|
39,333
|
|
Cash, Cash Equivalents and Restricted Cash and Cash
Equivalents, beginning of period
|
|
|
54,666
|
|
|
|
4,823
|
|
|
|
24,983
|
|
|
|
84,472
|
|
Cash, Cash Equivalents and Restricted Cash and Cash
Equivalents, end of period
|
|
$
|
33,826
|
|
|
$
|
2,965
|
|
|
$
|
87,014
|
|
|
$
|
123,805
|
|
16. SUBSEQUENT EVENTS
Dividend
On April 6, 2020, the Board of Directors declared a quarterly cash dividend of $0.48 per share of common stock which was paid on April 24, 2020 to shareholders of record as of the close of business on April 17, 2020.
32
Table of Contents