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Commitments, Contingencies And Other Tax Matters | 9 Months Ended
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Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract] |
Commitments, Contingencies and Other Tax Matters | COMMITMENTS, CONTINGENCIES AND OTHER TAX MATTERS Litigation, Claims and Assessments 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 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. Construction 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 $62.1 million of which $17.6 million was spent through the third quarter of 2013. The Company estimates the remaining capital requirements related to these capital projects will be $44.5 million which will be spent through fiscal year 2013. Capital expenditures related to facility maintenance costs are expected to range between $30.0 million and $35.0 million for fiscal year 2013. Facility Purchase On May 7, 2013, the Company executed a definitive agreement for the purchase of the land, buildings and improvements, and tangible personal property and fixtures of the 1,287 bed Joe Corley Detention Center (the "Center") located in Montgomery County, Texas for a purchase price of approximately $65.0 million. The Center was previously managed by the Company under a managed-only contract with Montgomery County and will continue to house federal detainees for U.S. Immigration and Customs Enforcement and the U.S. Marshals Service under an Intergovernmental Services Agreement. The transaction closed on June 7, 2013. Employment Agreement On April 29, 2013, GEO and Mr. George C. Zoley, the Company's Chief Executive Officer, entered into the First Amendment to Third Amended and Restated Executive Employment Agreement (the “First Amendment”). The First Amendment modifies Mr. Zoley’s employment agreement by eliminating the automatic cost of living increase applicable to his annual base salary and instead provides that his annual base salary may be increased in the sole discretion of the Board of Directors for cost of living increases to be determined by the Board of Directors Additionally, the First Amendment modifies the termination payment Mr. Zoley would receive in the event of a termination of employment other than a termination by GEO for cause (as defined in the Third Amended and Restated Executive Employment Agreement) or a termination by Mr. Zoley without good reason (as defined in the Third Amended and Restated Executive Employment Agreement) from three times the amount of Mr. Zoley’s base salary plus annual bonus to two times the amount of Mr. Zoley’s base salary plus annual bonus. On May 29, 2013, the Company and the Chief Executive Officer entered into the Second Amendment to Third Amended and Restated Executive Employment Agreement (the "Second Amendment"). The Second Amendment modifies the Chief Executive Officer's employment agreement by decreasing the maximum target annual performance award he may receive from 150% of his annual base salary to 100% of his annual base salary. Contract Awards and Terminations On September 9, 2013, GEO announced that it has entered into five year contracts inclusive of renewal options, with U.S. Immigration and Customs Enforcement ("ICE") for the housing of immigration detainees in a new 400-bed Transfer Center to be located at England Airpark in Alexandria, Louisiana (the "Center"). GEO will finance, develop and manage the company-owned Center, which is expected to be completed during the fourth quarter of 2014. On September 23, 2013, GEO announced that it had signed a five year contract with the California Department of Corrections and Rehabilitation for the housing of 1,400 California inmates at the company-owned 700-bed Central Valley Modified Community Correctional Facility and the Company-owned 700-bed Desert View Modified Community Correctional Facility located in McFarland, California and Adelanto, California, respectively. GEO expects to begin the intake of inmates at both facilities in the fourth quarter of 2013. These facilities were previously included in the Company's idle facility inventory. As previously disclosed, the contract for the housing of Alaskan inmates at the Hudson Correctional Facility located in Hudson, Colorado was terminated during the third quarter of 2013. The termination of this contract did not have a material impact on the Company's financial position, results of operations and/or cash flows. Refer to Note 16 - Subsequent Events for additional contract awards and terminations occurring in October and November 2013. Idle Facilities The Company is currently marketing approximately 6,000 vacant beds at six of its idle facilities to potential customers. The carrying values of these idle facilities, which are included in Property and Equipment, Net and Assets Held for Sale in the consolidated balance sheets, totaled $193.6 million as of September 30, 2013, excluding equipment and other assets that can be easily transferred for use at other facilities. Other Tax Matters
• | As a result of the REIT conversion as more fully discussed in Note 1 - Basis of Presentation, the Company reorganized its operations and moved non-real estate components into TRSs. The TRS structure requires the provisions of services between affiliated companies which are conducted at arm's length subject to applicable tax law and promulgated tax regulations. The Company has, with the assistance of its tax advisors, undertaken substantial analysis to determine and document the appropriateness of the arm's length compensation used in compliance with such tax rules which is reviewed on a periodic basis.
• | During 2013, GEO had a tax benefit relating to its REIT conversion, miscellaneous nonrecurring items, and a net release of tax reserves primarily due to the settlement of IRS audit years 2010 and 2011, partially offset by an initial reserve for uncertain tax positions relating to the REIT conversion. Together these items had a favorable impact to the effective tax rate and resulted in a tax benefit of $7.8 million and $14.1 million for the three months and nine months ended September 30, 2013, respectively.

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