GEO GROUP INC MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

Forward-Looking Information


This Quarterly Report on Form 10-Q and the documents incorporated by reference
herein contain "forward-looking" statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. "Forward-looking" statements are any
statements that are not based on historical information. Statements other than
statements of historical facts included in this report, including, without
limitation, statements regarding our future financial position, business
strategy, the impact of COVID-19 on our business, the efficacy and distribution
of COVID-19 vaccines, budgets, projected costs and plans and objectives of
management for future operations, legal proceedings, our corporate structure and
potential steps to address our future debt maturities are "forward-looking"
statements. Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"intend," "plan," "believe," "seek," "estimate" or "continue" or the negative of
such words or variations of such words and similar expressions. These statements
are not guarantees of future performance and involve certain risks,
uncertainties and assumptions, which are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecasted
in such forward-looking statements and we can give no assurance that such
forward-looking statements will prove to be correct. Important factors that
could cause actual results to differ materially from those expressed or implied
by the forward-looking statements, or "cautionary statements," include, but are
not limited to:


•

our ability to mitigate the transmission of the current pandemic of the novel
coronavirus, or COVID-19, at our secure facilities, processing centers and
reentry centers;

the magnitude, severity and duration of the COVID-19 pandemic and its impact on
our business, financial condition, results of operations and cash flows;

our ability to timely build and/or open facilities as planned, successfully
manage such facilities and successfully integrate such facilities into our
operations without substantial additional costs;

our ability to estimate the government's level of utilization of public-private
partnerships for secure services and the impact of any modifications or
reductions by our government customers of their utilization of public-private
partnerships;

our ability to accurately project the size and growth of public-private
partnerships for secure services in the U.S. and internationally and our ability
to capitalize on opportunities for public-private partnerships;

our ability to successfully respond to any challenges or concerns that our
government customers may raise regarding their use of public-private
partnerships for secure services, including finding other government customers
or alternative uses for facilities where a government customer has discontinued
or announced that a contract with us will be discontinued;

the impact of adopted or proposed executive action or legislation aimed at
limiting public-private partnerships for secure facilities, processing centers
and community reentry centers or limiting or restricting the business and
operations of financial institutions or others who do business with us;

our ability to successfully respond to delays encountered by states pursuing
public-private partnerships for secure services and cost savings initiatives
implemented by a number of states;

our ability to activate the inactive beds at our idle facilities;

our ability to maintain or increase occupancy rates at our facilities and the
impact of fluctuations in occupancy levels on our revenues and profitability;

the impact of our termination of our REIT election and the discontinuation of
quarterly dividend payments and our ability to maximize the use of cash flows to
repay debt, deleverage and internally fund growth;

we may fail to realize the anticipated benefits of terminating our REIT election
or those benefits may take longer to realize than expected, if at all, or may
not offset the costs of terminating our REIT election and becoming a taxable C
Corporation;

if we failed to remain qualified as a REIT for those years we elected REIT
status, we would be subject to additional corporate income taxes and would not
be able to deduct distributions to shareholders when computing our taxable
income for those years;

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our ability to expand, diversify and grow our secure services, reentry,
community-based services, monitoring services, evidence-based supervision and
treatment programs and secure transportation services businesses;

our ability to win management contracts for which we have submitted proposals,
retain existing management contracts, prevail in any challenge or protest
involving the award of a management contract and meet any performance standards
required by such management contracts;

our ability to raise new project development capital given the often short-term
nature of the customers’ commitment to use newly developed facilities;

our ability to develop long-term earnings visibility;

our ability to successfully conduct our operations in the United Kingdom, South
Africa
and Australia through joint ventures or a consortium;

the impact of the LIBOR transition;

the instability of foreign exchange rates, exposing us to currency risks in
Australia, the United Kingdom, and South Africa, or other countries in which we
may choose to conduct our business;

an increase in unreimbursed labor rates;

our exposure to rising medical costs;

our ability to manage costs and expenses relating to ongoing litigation arising
from our operations;

our ability to successfully pursue an appeal to reverse the recent unfavorable
verdict and judgments in the retrial of the lawsuits in the State of Washington,
our company being required to record an accrual for the judgments in the future,
and our ability to defend similar other pending litigation and the effect such
litigation may have on our company;

our ability to prevail in the en banc hearing by the Ninth Circuit Court of
Appeals
of our challenge to AB32 and similar litigation that is pending in the
State of Washington;

our ability to accurately estimate on an annual basis, loss reserves related to
general liability, workers’ compensation and automobile liability claims;

our ability to fulfill our debt service obligations and its impact on our
liquidity;

our ability to deleverage and repay, refinance or otherwise address our debt
maturities in an amount or on the timeline we expect, or at all;

we are incurring significant indebtedness in connection with substantial ongoing
capital expenditures. Capital expenditures for existing and future projects may
materially strain our liquidity;

despite current indebtedness levels, we may still incur more indebtedness, which
could further exacerbate the risks relating to our indebtedness;

the covenants in the indentures governing the Convertible Notes, the 6.00%
Senior Notes due 2026, the 5.125% Senior Notes due 2023 and the 5.875% Senior
Notes due 2024 and the covenants in our senior credit facility, and following
the offering discussed in the Transaction Support Agreement and registered by
the Registration Statement, the covenants in the indenture governing the 2028
Private Exchange Notes, the New Notes indenture and the Exchange Credit
Agreement impose significant operating and financial restrictions which may
adversely affect our ability to operate our business;

servicing our indebtedness will require a significant amount of cash and our
ability to generate cash depends on many factors beyond our control and we may
not be able to generate the cash required to service our indebtedness;

because portions of our senior indebtedness have floating interest rates, a
general increase in interest rates would adversely affect cash flows;

we depend on distributions from our subsidiaries to make payments on our
indebtedness and these distributions may not be made;

we may not be able to satisfy our repurchase obligations in the event of a
change of control because the terms of our indebtedness or lack of funds may
prevent us from doing so;

our ability to identify and successfully complete any potential sales of
additional Company-owned assets and businesses in commercially advantageous
terms on a timely basis, or at all;

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from time to time, we may not have a management contract with a client to
operate existing beds at a facility or new beds at a facility that we are
expanding, and we cannot assure you that such a contract will be obtained.
Failure to obtain a management contract for these beds will subject us to
carrying costs with no corresponding management revenue;

negative conditions in the capital markets could prevent us from obtaining
financing on desirable terms, which could materially harm our business;

we are subject to the loss of our facility management contracts, due to
executive orders, terminations, non-renewals or competitive re-bids, which could
adversely affect our results of operations and liquidity, including our ability
to secure new facility management contracts from other government customers;

our growth depends on our ability to secure contracts to develop and manage new
secure facilities, processing centers and community-based facilities and to
secure contracts to provide electronic monitoring services, community-based
reentry services and monitoring and supervision services, the demand for which
is outside our control;

we may not be able to meet state requirements for capital investment or locate
land for the development of new facilities, which could adversely affect our
results of operations and future growth;

we partner with a limited number of governmental customers who account for a
significant portion of our revenues. The loss of, or a significant decrease in
revenues from, these customers could seriously harm our financial condition and
results of operations;

State budgetary constraints may have a material adverse impact on us;

competition for contracts may adversely affect the profitability of our
business;

we are dependent on government appropriations, which may not be made on a timely
basis or at all and may be adversely impacted by budgetary constraints at the
federal, state, local and foreign government levels;

public and political resistance to the use of public-private partnerships for
secure facilities, electronic monitoring and supervision as alternatives to
detention, processing centers and community reentry centers could result in our
inability to obtain new contracts or the loss of existing contracts, impact our
ability to obtain or refinance debt financing or enter into commercial
arrangements, which could have a material adverse effect on our business,
financial condition, results of operations and the market price of our
securities;

adverse publicity may negatively impact our ability to retain existing contracts
and obtain new contracts;

we may incur significant start-up and operating costs on new contracts before
receiving related revenues, which may impact our cash flows and may not be
recouped;

failure to comply with extensive government regulation and applicable
contractual requirements could have a material adverse effect on our business,
financial condition or results of operations;

we may face community opposition to facility locations, which may adversely
affect our ability to obtain new contracts;

our business operations expose us to various liabilities for which we may not
have adequate insurance and may have a material adverse effect on our business,
financial condition or results of operations;

we may not be able to obtain or maintain the insurance levels required by our
government contracts;

our exposure to rising general insurance costs;

natural disasters, pandemic outbreaks, global political events and other serious
catastrophic events could disrupt operations and otherwise materially adversely
affect our business and financial condition;

our international operations expose us to risks that could materially adversely
affect our financial condition and results of operations;

we conduct certain of our operations through joint ventures or consortiums,
which may lead to disagreements with our joint venture partners or business
partners and adversely affect our interest in the joint ventures or consortiums;

we are dependent upon our senior management and our ability to attract and
retain sufficient qualified personnel;

our profitability may be materially adversely affected by inflation;

various risks associated with the ownership of real estate may increase costs,
expose us to uninsured losses and adversely affect our financial condition and
results of operations;

risks related to facility construction and development activities may increase
our costs related to such activities;

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the rising cost and increasing difficulty of obtaining adequate levels of surety
credit on favorable terms could adversely affect our operating results;

adverse developments in our relationship with our employees could adversely
affect our business, financial condition or results of operations;

technological changes could cause our electronic monitoring products and
technology to become obsolete or require the redesign of our electronic
monitoring products, which could have a material adverse effect on our business;

any negative changes in the level of acceptance of or resistance to the use of
electronic monitoring products and services by governmental customers could have
a material adverse effect on our business, financial condition and results of
operations;

we depend on a limited number of third parties to manufacture and supply quality
infrastructure components for our electronic monitoring products. If our
suppliers cannot provide the components or services we require in a timely
manner and/or with such quality as we expect, our ability to market and sell our
electronic monitoring products and services could be harmed;

the interruption, delay or failure of the provision of our services or
information systems could adversely affect our business;

an inability to acquire, protect or maintain our intellectual property and
patents in the electronic monitoring space could harm our ability to compete or
grow;

our electronic monitoring products could infringe on the intellectual property
rights of others, which may lead to litigation that could itself be costly,
could result in the payment of substantial damages or royalties, and/or prevent
us from using technology that is essential to our products;

we license intellectual property rights in the electronic monitoring space,
including patents, from third party owners. If such owners do not properly
maintain or enforce the intellectual property underlying such licenses, our
competitive position and business prospects could be harmed. Our licensors may
also seek to terminate our license;

we may be subject to costly product liability claims from the use of our
electronic monitoring products, which could damage our reputation, impair the
marketability of our products and services and force us to pay costs and damages
that may not be covered by adequate insurance;

our ability to identify suitable acquisitions, and to successfully complete and
integrate such acquisitions on satisfactory terms, to enhance occupancy levels
and the financial performance of assets acquired and estimate the synergies to
be achieved as a result of such acquisitions or achieve such synergies;

as a result of our acquisitions, we have recorded and will continue to record a
significant amount of goodwill and other intangible assets. In the future, our
goodwill or other intangible assets may become impaired, which could result in
material non-cash charges to our results of operations;

we are subject to risks related to corporate social responsibility;

our ability to successfully consummate the Exchange Offers and Consent
Solicitations, the Private Exchange and the Credit Agreement Exchange (including
the outcome and impact of any legal challenges to any of these transactions);

the market price of our common stock may vary substantially;

future sales of shares of our common stock or securities convertible into common
stock could adversely affect the market price of our common stock and may be
dilutive to current shareholders;

various anti-takeover protections applicable to us may make an acquisition of us
more difficult and reduce the market value of our common stock;

failure to maintain effective internal controls in accordance with Section 404
of the Sarbanes-Oxley Act of 2002 could have an adverse effect on our business
and the trading price of our common stock;

we may issue additional debt securities that could limit our operating
flexibility and negatively affect the value of our common stock; and

other factors contained in our filings with the SEC, including, but not limited
to, those detailed in the Annual Report on Form 10-K, our Quarterly Reports on
Form 10-Q and our Current Reports on Form 8-K filed with the SEC.


We undertake no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise, except as
required by law. All subsequent written and oral forward-looking statements
attributable to us, or persons

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acting on our behalf, are expressly qualified in their entirety by the
cautionary statements included in this Quarterly Report on Form 10-Q.

Introduction

The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our consolidated
results of operations and financial condition. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of numerous factors including, but not limited to, those
described above under "Forward-Looking Information", those described below under
"Part II - Item 1A. Risk Factors" and under "Part I - Item 1A. Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2021. This
discussion should be read in conjunction with our unaudited consolidated
financial statements and notes thereto included in this Quarterly Report on Form
10-Q.

We specialize in the ownership, leasing and management of secure facilities,
processing centers and reentry facilities and the provision of community-based
services in the United States, Australia and South Africa. We own, lease and
operate a broad range of secure facilities including maximum, medium and
minimum-security facilities, processing centers, as well as community-based
reentry facilities. We develop new facilities based on contract awards, using
our project development expertise and experience to design, construct and
finance what we believe are state-of-the-art facilities. We provide innovative
technologies, industry-leading monitoring services, and evidence-based
supervision and treatment programs for community based programs. We also provide
secure transportation services domestically and in the United Kingdom through
our joint venture GEOAmey.

We operated REIT from January 1, 2013 through December 31, 2020. As a REIT, we
provided services and conducted other business activities through TRSs. A TRS is
a subsidiary of a REIT that is subject to applicable corporate income tax rates
and certain qualification requirements. Our use of TRSs permitted us to engage
in certain business activities in which the REIT could not engage directly, so
long as those activities were conducted in entities that elected to be treated
as TRSs under the Code, and enabled GEO to, among other things, provide
correctional services at facilities that we own and at facilities owned by our
government partners. A TRS is not subject to the distribution requirements
applicable to REITs so it may retain income generated by its operations for
reinvestment.

On December 2, 2021, we announced that our Board unanimously approved a plan to
terminate our REIT status and become a taxable C Corporation, effective for the
year ended December 31, 2021. As a result, we are no longer required to operate
under REIT rules, including the requirement to distribute at least 90% of REIT
taxable income to our shareholders, which provides us with greater flexibility
to use our free cash flow. Effective January 1, 2021, we were subject to federal
and state income taxes on our taxable income at applicable tax rates and are no
longer entitled to a tax deduction for dividends paid. We operated as a REIT for
the 2020 tax year, and existing REIT requirements and limitations, including
those established by our organizational documents, remained in place until
December 31, 2020. In connection with terminating our REIT status, the Board
also voted unanimously to discontinue our quarterly dividend.

At June 30, 2022, our worldwide operations include the management and/or
ownership of approximately 82,000 beds at 102 secure services and community
based facilities, including idle facilities, and also include the provision of
community supervision services for an average of more than 400,000 individuals,
including nearly 200,000 through an array of technology products including radio
frequency, GPS, and alcohol monitoring devices.

We provide a diversified scope of services on behalf of our government agency
partners:

our secure facility management services involve the provision of security,
administrative, rehabilitation, education, and food services at secure services
facilities;

our reentry services involve supervision of individuals in community-based
programs and re-entry centers and the provision of temporary housing,
programming, employment assistance and other services with the intention of the
successful reintegration of residents into the community;

we provide comprehensive electronic monitoring and supervision services;

we develop new facilities, using our project development experience to design,
construct and finance what we believe are state-of-the-art facilities;

we provide secure transportation services; and

our services are provided at facilities which we either own, lease or are owned
by the government.



For the six months ended June 30, 2022 and 2021, we had consolidated revenues of
$1,139.4 million and $1,141.8 million, respectively. We maintained an average
company-wide facility occupancy rate of 85.5% including 71,575 active beds and
excluding

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10,406 idle beds which includes those being marketed to potential customers for
the six months ended June 30, 2022, and 87.5% including 79,726 active beds and
excluding 10,104 idle beds which includes those being marketed to potential
customers for the six months ended June 30, 2021. Overall occupancy levels have
been lower than prior periods due to the impact of the COVID-19 pandemic as well
as the impacts of the Executive Order (as defined below).


Reference is made to Part II, Item 7 of our Annual Report on Form 10-K filed
with the SEC on February 28, 2022, for further discussion and analysis of
information pertaining to our financial condition and results of operations as
of and for the year ended December 31, 2021.

Business Segments


We conduct our business through four reportable business segments: our U.S.
Secure Services segment; our Electronic Monitoring and Supervision Services
segment; our Reentry Services segment and our International Services segment. We
have identified these four reportable segments to reflect our current view that
we operate four distinct business lines, each of which constitutes a material
part of our overall business. We have determined that our previously reportable
business segment, Facility Construction and Design, no longer qualifies as a
reportable segment as it no longer meets certain quantitative thresholds and has
been aggregated with our International Services reportable business segment. In
addition, we appointed a new Chief Executive Officer, the chief operating
decision maker, during fiscal 2021. Based on changes to the way our chief
operating decision maker views the business and financial results used to
allocate resources to our electronic monitoring and supervision services
operations, along with the growth of the business, we report the electronic
monitoring and supervision services operation as a separate reportable segment.
This new segment is presented as Electronic Monitoring and Supervision Services.
Previously, the electronic monitoring and supervision services operations were
included in our GEO Care reportable segment. In addition, the GEO Care
reportable segment was renamed Reentry Services and includes services provided
to adults for residential and non-residential treatment, educational and
community-based programs, pre-release and half-way house programs. We have
retroactively restated our segment presentation for the three and six months
ended June 30, 2021 to reflect these changes.

Our U.S. Secure Services segment primarily encompasses our U.S.-based
public-private partnership secure services business. Our Electronic Monitoring
and Supervision Services segment, which conducts its services in the U.S.,
consists of our electronic monitoring and supervision services. Our Reentry
Services segment consists of various community-based and reentry services. Our
International Services segment primarily consists of our public-private
partnership secure services operations in Australia and South Africa.

Recent Developments

Transaction Support Agreement


On July 18, 2022, the Company entered into a Transaction Support Agreement with
the Consenting Creditors setting forth principal terms for a Transaction to
address the upcoming maturities of the Company's outstanding debt in 2023, 2024,
and 2026. Refer to Note 15 - Subsequent Events of the Notes to Unaudited
Consolidated Financial Statements included in Part I, Item 1 of this Quarterly
Report on Form 10-Q for further discussion.


Executive Order


On January 26, 2021, President Biden signed an executive order directing the
United States Attorney General not to renew Department of Justice ("DOJ")
contracts with privately operated criminal detention facilities, as consistent
with applicable law. Two agencies of the DOJ, the Federal Bureau of Prisons
("BOP") and the U.S. Marshals Service ("USMS"), utilize GEO's support services.
The BOP houses inmates who have been convicted of federal crimes, and the USMS
is generally responsible for detainees who are awaiting trial or sentencing in
U.S. federal courts. As of June 30, 2022, GEO has three
company-owned/company-leased facilities under direct contracts with USMS, which
have current contract option periods that expire between February 28, 2023 and
September 30, 2023. These facilities combined represented approximately 6% of
our revenues for the year ended December 31, 2021.

President Biden's administration may implement additional executive orders or
directives relating to federal criminal justice policies and/or immigration
policies, which may impact the federal government's use of public-private
partnerships with respect to secure correctional and detention facilities and
immigration processing centers, including with respect to our contracts, and/or
may impact the budget and spending priorities of federal agencies, including the
BOP, USMS, and U.S. Immigration and Customs Enforcement ("ICE"), which is an
agency of the U.S. Department of Homeland Security.

COVID-19

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We have been and are currently closely monitoring the impact of the COVID-19
pandemic and the efficacy and distribution of COVID-19 vaccines on all aspects
of our business and geographies, including how it will impact those entrusted in
our care and governmental partners. We did incur disruptions during the six
months ended June 30, 2022 from the COVID-19 pandemic and are unable to predict
the overall future impact that the COVID-19 pandemic will have on our financial
condition, results of operations and cash flows due to numerous uncertainties.
Refer to further discussion regarding the economic impacts of COVID-19 to our
operations in the Outlook section below.


Contract Developments


On June 30, 2022, we announced that the USMS has exercised the current contract
option period to continue to utilize the 770-bed Western Region Detention
Facility in San Diego, California, which is effective through September 30,
2023. The existing contract also has two additional two-year contract option
periods, which if exercised by the USMS, would be effective through September
30, 2025 and September 30, 2027, respectively. Our Western Region Detention
Facility contract with the USMS had been operating under a 90-day contract
extension which was scheduled to end on June 30, 2022.

Idle Facilities


We are currently marketing 10,361 vacant beds at nine of our idle facilities to
potential customers. The carrying values of these idle facilities totaled $272.6
million as of June 30, 2022, excluding equipment and other assets that can be
easily transferred for use at other facilities. Refer to Note 11 - Commitments,
Contingencies and Other Matters included in Part I, Item 1, of this Quarterly
Report on Form 10-Q for additional information.

Critical Accounting Policies


The accompanying unaudited consolidated financial statements are prepared in
conformity with accounting principles generally accepted in the United States.
As such, we are required to make certain estimates, judgments and assumptions
that we believe are reasonable based upon the information available. These
estimates and assumptions affect the reported amounts of assets and liabilities
as of the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. We routinely evaluate our estimates
based on historical experience and on various other assumptions that management
believes are reasonable under the circumstances. Actual results may differ from
these estimates under different assumptions or conditions. During the six months
ended June 30, 2022, we did not experience any significant changes in estimates
or judgments inherent in the preparation of our consolidated financial
statements. A summary of our significant accounting policies is contained in
Note 1 to our consolidated financial statements included in our Annual Report on
Form 10-K for the year ended December 31, 2021.

RESULTS OF OPERATIONS


The following discussion and analysis should be read in conjunction with our
unaudited consolidated financial statements and the notes to our unaudited
consolidated financial statements included in Part I, Item 1, of this Quarterly
Report on Form 10-Q.

Comparison of Second Quarter 2022 and Second Quarter 2021

Revenues

                                   2022        % of Revenue        2021        % of Revenue      $ Change       % Change
                                                                  (Dollars in thousands)
U.S. Secure Services             $ 353,402              60.1 %   $ 368,394              65.2 %   $ (14,992 )         (4.1 )%
Electronic Monitoring and
Supervision Services               121,484              20.7 %      64,835              11.5 %      56,649           87.4 %
Reentry Services                    65,720              11.2 %      77,070              13.6 %     (11,350 )        (14.7 )%
International Services              47,571               8.1 %      55,120               9.7 %      (7,549 )        (13.7 )%
Total                            $ 588,177             100.0 %   $ 565,419             100.0 %   $  22,758            4.0 %




U.S. Secure Services

Revenues decreased by $15.0 million in Second Quarter 2022 compared to Second
Quarter 2021 primarily due to aggregate decreases of $42.9 million due to the
ramp-down/deactivations of our company-owned Big Springs, Flightline and Great
Plains Correctional Facilities, our Queens Detention Facility, our managed-only
Bay and Graceville Correctional Rehabilitation Facilities, as well as our
managed-only George W. Hill Correctional Facility. These decreases were
partially offset by aggregate net increases of $15.3 million resulting from the
contract activation and ramp up at our company-owned Moshannon Valley Processing
Center, Desert View Annex

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as well as our company-owned Eagle Pass Detention Center. In addition, we
experienced aggregate net increases in rates and/or per diem amounts in
connection with contract modifications, transportation services and increased
occupancies of $12.6 million.




The number of compensated mandays in U.S. Secure Services facilities was
approximately 4.5 million in Second Quarter 2022 and 5.0 million in Second
Quarter 2021. We experienced an aggregate net decrease of approximately 500,000
mandays as a result of contract terminations, partially offset by contract
activations and increases in occupancies discussed above. We look at the average
occupancy in our facilities to determine how we are managing our available beds.
The average occupancy is calculated by taking compensated mandays as a
percentage of capacity. The average occupancy in our U.S. Secure Services
facilities was 90.0% and 88.6% of capacity in the Second Quarter 2022 and Second
Quarter 2021, respectively, excluding idle facilities.

Electronic Monitoring and Supervision Services


Revenues increased by $56.6 million in Second Quarter 2022 compared to Second
Quarter 2021 due to increases in average participant counts under the Intensive
Supervision and Appearance Program ("ISAP").

Reentry Services


Revenues decreased by $11.4 million in Second Quarter 2022 compared to Second
Quarter 2021 primarily due to a decrease of $17.3 million as a result of the
sale of our youth business which was effective July 1, 2021. This decrease was
partially offset by increases of $3.2 million due to new/reactivated contracts,
day reporting centers and programs including the activation of our company-owned
Tampa Residential Reentry Center in Tampa, Florida in September 2021. Also
partially offsetting the decrease was a net aggregate increase of $2.7 million
related to increased census levels at certain of our community-based and reentry
centers due to increased programming needs and referrals.

International Services


Revenues for International Services decreased by $7.5 million in Second Quarter
2022 compared to Second Quarter 2021 primarily due to foreign exchange rate
fluctuations of $3.8 million. We also experienced a decrease of $3.7 million
primarily driven by the transition of our management contract for the Dungavel
House Immigration Removal Centre in the United Kingdom to the government
effective September 30, 2021.



Operating Expenses

                                                % of Segment                     % of Segment
                                   2022           Revenues          2021           Revenues        $ Change       % Change
                                                                   (Dollars in thousands)
U.S. Secure Services             $ 261,525               74.0 %   $ 268,963               73.0 %   $  (7,438 )         (2.8 )%
Electronic Monitoring and
Supervision Services                59,277               48.8 %      28,488               43.9 %      30,789          108.1 %
Reentry Services                    47,042               71.6 %      58,829               76.3 %     (11,787 )        (20.0 )%
International Services              43,947               92.4 %      48,729               88.4 %      (4,782 )         (9.8 )%
Total                            $ 411,791               70.0 %   $ 405,009               71.6 %   $   6,782            1.7 %




U.S. Secure Services

Operating expenses for U.S. Secure Services decreased by $7.4 million in Second
Quarter 2022 compared to Second Quarter 2021 primarily due to decreases of $35.9
million related to the ramp-down/deactivations of our company-owned Big Springs,
Flightline and Great Plains Correctional Facilities, our Queens Detention
Facility, our managed-only Bay and Graceville Correctional Rehabilitation
Facilities, as well as our managed-only George W. Hill Correctional Facility.
These decreases were partially offset by aggregate net increases of $11.2
million resulting from the contract activation and ramp up at our company-owned
Moshannon Valley Processing Center, Desert View Annex as well as our
company-owned Eagle Pass Detention Center. In addition, we experienced aggregate
net increases in connection with transportation services, increased occupancies
and the variable costs associated with those services of $17.3 million.



Electronic Monitoring and Supervision Services

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Operating expenses increased by $30.8 million in Second Quarter 2022 compared to
Second Quarter 2021 primarily due to increases in variable costs related to
increases in average participant counts under ISAP.

Reentry Services


Operating expenses for Reentry Services decreased by $11.8 million during Second
Quarter 2022 compared to Second Quarter 2021 primarily due to a decrease of
$14.9 million as a result of the sale of our youth business which was effective
July 1, 2021. We also experienced a decrease of $1.0 million due to contract
terminations. These decreases were partially offset by increases of $2.0 million
due to new/reactivated contracts, day reporting centers and programs including
the activation of our company-owned Tampa Residential Reentry Center in Tampa,
Florida in September 2021. Also partially offsetting the decreases was a net
aggregate increase of $2.1 million related to increased census levels at certain
of our community-based and reentry centers due to increased programming needs
and referrals.

International Services

Operating expenses for International Services decreased by $4.8 million in
Second Quarter 2022 compared to Second Quarter 2021 primarily due to foreign
exchange rate fluctuations of $3.5 million. We also experienced a decrease of
$1.3 million primarily driven by the transition of our management contract for
the Dungavel House Immigration Removal Centre in the United Kingdom to the
government effective September 30, 2021.


Depreciation and Amortization

                                              % of Segment                    % of Segment
                                   2022          Revenue          2021          Revenue         $ Change       % Change
                                                                 (Dollars in thousands)
U.S. Secure Services             $ 19,053               5.4 %   $ 20,529                5.6 %   $  (1,476 )         (7.2 )%
Electronic Monitoring and
Supervision Services                7,962               6.6 %      7,355               11.3 %         607            8.3 %
Reentry Services                    4,471               6.8 %      4,835                6.3 %        (364 )         (7.5 )%
International Services                530               1.1 %        587                1.1 %         (57 )         (9.7 )%
Total                            $ 32,016               5.4 %   $ 33,306   
            5.9 %   $  (1,290 )         (3.9 )%




U.S. Secure Services

U.S. Secure Services depreciation and amortization expense decreased in Second
Quarter 2022 compared to Second Quarter 2021 primarily due to certain assets
becoming fully depreciated and or amortized as well as certain asset
dispositions at our company-owned facilities.

Electronic Monitoring and Supervision Services


Depreciation and amortization expense increased slightly in Second Quarter 2022
compared to Second Quarter 2021 primarily due to certain leasehold improvements
and equipment additions.

Reentry Services

Reentry Services depreciation and amortization expense decreased slightly in
Second Quarter 2022 compared to Second Quarter 2021 primarily due to certain
asset dispositions at our company-owned centers.

International Services

Depreciation and amortization expense decreased slightly in Second Quarter 2022
compared to Second Quarter 2021 primarily due to foreign exchange rate
fluctuations.

Other Unallocated Operating Expenses


                                        2022       % of Revenue        2021 

% of Revenue $ Change % Change

                                                                      (Dollars in thousands)
General and Administrative Expenses   $ 49,296               8.4 %   $ 54,688               9.7 %   $  (5,392 )         (9.9 )%




                                       39
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General and administrative expenses comprise substantially all of our other
unallocated operating expenses which primarily includes corporate management
salaries and benefits, professional fees and other administrative expenses.
General and administrative expenses decreased in Second Quarter 2022 compared to
Second Quarter 2021 by $5.4 million primarily due to $7.5 million in one-time
employee restructuring expenses incurred in Second Quarter 2021. Partially
offsetting this decrease were increased professional fees for financial and
legal advisors assisting us in reviewing potential asset sales as well as normal
professional, consulting and other administrative expenses.

Non-Operating Expenses

Interest Income and Interest Expense

                                   2022       % of Revenue        2021       % of Revenue       $ Change       % Change
                                                                 (Dollars in thousands)
Interest Income                  $  5,562               0.9 %   $  5,985               1.1 %   $     (423 )         (7.1 )%
Interest Expense                 $ 33,225               5.6 %   $ 32,053               5.7 %   $    1,172            3.7 %


Interest income decreased in Second Quarter 2022 compared to Second Quarter 2021
primarily due to the effect of foreign exchange rate fluctuations.


Interest expense increased in Second Quarter 2022 compared to Second Quarter
2021 primarily due to higher balances under the revolver component of our credit
facility. During 2021, we drew down significant amounts under our revolver as a
conservative precautionary step to preserve liquidity, maintain financial
flexibility, and obtain additional funds for general corporate purposes. Also
contributing to the increase was the effect of increases in the LIBOR rate.



Gain on Extinguishment of Debt

                                   2022       % of Revenue        2021      

% of Revenue $ Change % Change

                                                                (Dollars in 

thousands)

Gain on Extinguishment of Debt   $      -                (- )%   $ 1,654               0.3 %   $  (1,654 )      (100.0 )%


During Second Quarter 2021, we repurchased $19.5 million in aggregate principal
amount of our 5.125% Senior Notes due 2023 at a weighted average price of 90.88%
for a total cost of $17.7 million. As a result of this transaction, we
recognized a gain on extinguishment of debt of $1.7 million, net of the
write-off of associated unamortized deferred loan costs.



(Gain) Loss on Dispositions of Real Estate

                                   2022        % of Revenue        2021     

% of Revenue $ Change % Change

                                                                 (Dollars in thousands)
(Gain) Loss on Dispositions of
Real Estate                      $ (3,680 )             (0.6 )%   $ 2,950               0.5 %   $  (6,630 )      (224.7 )%


In Second Quarter 2022, we sold our company-owned previously idled Perry County
Correctional Facility located in Alabama for a net gain of approximately $3.7
million. In Second Quarter 2021, we disposed of certain assets at our
company-owned Queens Detention Center, our company-owned Alle Kiski Pavillion
and our company-owned DuPage Interventions center and incurred a net loss on
disposition of $3.0 million.

Income Tax Provision

                               2022        Effective Rate       2021        

Effective Rate $ Change % Change

                                                               (Dollars in 

thousands)

Provision for Income Taxes   $ 18,898                 26.6 %   $ 5,063                 11.2 %   $  13,835          273.3 %



The provision for income taxes and our effective tax rate during Second Quarter
2022 increased compared to Second Quarter 2021 principally due to the Company
electing to terminate its REIT status at the end of 2021 and becoming a taxable
C corporation. In Second Quarter 2022, there was no net discrete tax expense as
compared to a $0.5 million net discrete tax expense in the Second Quarter 2021.
We estimate our 2022 annual effective tax rate to be in the range of
approximately 27% to 29%, exclusive of any discrete items.


                                       40
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Equity in Earnings of Affiliates, net of Income Tax Provision


                                    2022       % of Revenue       2021      

% of Revenue $ Change % Change

                                                                  (Dollars in thousands)
Equity in Earnings of Affiliates   $ 1,480               0.3 %   $ 1,942               0.3 %   $     (462 )        (23.8 )%



Equity in earnings of affiliates, presented net of income tax provision,
represents the earnings of SACS and GEOAmey in the aggregate. Equity in earnings
of affiliates decreased during Second Quarter 2022 compared to Second Quarter
2021 primarily due to less favorable performance by GEOAmey.


Comparison of Six Months 2022 and Six Months 2021

Revenues
                                    2022          % of Revenue         2021         % of Revenue      $ Change       % Change
                                                                    (Dollars in thousands)
U.S. Secure Services             $   704,647               61.8 %   $   755,405              66.2 %   $ (50,758 )         (6.7 )%
Electronic Monitoring and
Supervision Services                 209,405               18.4 %       125,213              11.0 %      84,192           67.2 %
Reentry Services                     127,151               11.2 %       152,174              13.3 %     (25,023 )        (16.4 )%
International Services                98,159                8.6 %       109,004               9.5 %     (10,845 )         (9.9 )%
Total                            $ 1,139,362                100 %   $ 1,141,796             100.0 %   $  (2,434 )         (0.2 )%




U.S. Secure Services

Revenues decreased by $50.8 million in Six Months 2022 compared to Six Months
2021 primarily due to aggregate decreases of $98.0 million due to the
ramp-down/deactivations of our company-owned D. Ray James, Rivers, Big Springs,
Flightline, Reeves County Detention I & II and Great Plains Correctional
Facilities, our Queens Detention Facility, our managed-only Bay and Graceville
Correctional Rehabilitation Facilities, as well as our managed-only George W.
Hill Correctional Facility. Also included in this decrease is the transition of
the operation of our company-owned Guadalupe County Correctional Facility to the
New Mexico Corrections Department in November 2021. These decreases were
partially offset by aggregate net increases of $19.9 million resulting from the
contract activation and ramp up at our company-owned Moshannon Valley Processing
Center, Desert View Annex as well as our company-owned Eagle Pass Detention
Center. In addition, we experienced aggregate net increases in rates and/or per
diem amounts in connection with contract modifications, transportation services
and increased occupancies of $27.3 million.



The number of compensated mandays in U.S. Secure Services facilities was
approximately 9.0 million in Six Months 2022 and 10.1 million in Six Months
2021. We experienced an aggregate net decrease of approximately 1,100,000
mandays as a result of contract terminations, partially offset by contract
activations and increases in occupancies discussed above. We look at the average
occupancy in our facilities to determine how we are managing our available beds.
The average occupancy is calculated by taking compensated mandays as a
percentage of capacity. The average occupancy in our U.S. Secure Services
facilities was 89.6% and 90.5% of capacity in Six Months 2022 and Six Months
2021, respectively, excluding idle facilities.

Electronic Monitoring and Supervision Services

Revenues increased by $84.2 million in Six Months 2022 compared to Six Months
2021 primarily due to increases in average participant counts under ISAP.

                                       41
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Reentry Services


Revenues decreased by $25.0 million in Six Months 2022 compared to Six Months
2021 primarily due to a decrease of $34.3 million as a result of the sale of our
youth business which was effective July 1, 2021. This decrease was partially
offset by increases of $6.1 million due to new/reactivated contracts, day
reporting centers and programs including the activation of our company-owned
Tampa Residential Reentry Center in Tampa, Florida in September 2021. Also
partially offsetting the decrease was a net aggregate increase of $3.2 million
related to increased census levels at certain of our community-based and reentry
centers due to increased programming needs and referrals.

International Services


Revenues for International Services decreased by $10.8 million in Six Months
2022 compared to Six Months 2021 primarily due to foreign exchange rate
fluctuations of $6.9 million. We also experienced a decrease of $3.9 million
primarily driven by the transition of our management contract for the Dungavel
House Immigration Removal Centre in the United Kingdom to the government
effective September 30, 2021.

Operating Expenses
                                                % of Segment                     % of Segment
                                   2022           Revenues          2021           Revenues        $ Change       % Change
                                                                   (Dollars in thousands)
U.S. Secure Services             $ 515,219               73.1 %   $ 566,741               75.0 %   $ (51,522 )         (9.1 )%
Electronic Monitoring and
Supervision Services               100,721               48.1 %      55,442               44.3 %      45,279           81.7 %
Reentry Services                    93,442               73.5 %     116,115               76.3 %     (22,673 )        (19.5 )%
International Services              87,570               89.2 %      94,862               87.0 %      (7,292 )         (7.7 )%
Total                            $ 796,952               69.9 %   $ 833,160               73.0 %   $ (36,208 )         (4.3 )%




U.S. Secure Services

Operating expenses for U.S. Secure Services decreased by $51.5 million in Six
Months 2022 compared to Six Months 2021 primarily due to decreases of $80.2
million related to the ramp-down/deactivations of our company-owned D. Ray
James, Rivers, Big Springs, Flightline, Reeves County Detention I & II and Great
Plains Correctional Facilities, our Queens Detention Facility, our managed-only
Bay and Graceville Correctional Rehabilitation Facilities, as well as our
managed-only George W. Hill Correctional Facility. Also included in this
decrease is the transition of the operation of our company-owned Guadalupe
County Correctional Facility to the New Mexico Corrections Department in
November 2021. We also experienced a net decrease of $6.2 million related to
certain indirect expenses primarily related to actuarial insurance expense
adjustment for general liability and employee medical. These decreases were
partially offset by aggregate net increases of $16.6 million resulting from the
contract activation and ramp up at our company-owned Moshannon Valley Processing
Center, Desert View Annex as well as our company-owned Eagle Pass Detention
Center. In addition, we experienced aggregate net increases in connection with
transportation services, increased occupancies and the variable costs associated
with those services of $18.3 million.

Electronic Monitoring and Supervision Services


Operating expenses increased by $45.3 million in Six Months 2022 compared to Six
Months 2021 primarily due to increases in variable costs related to increases in
average participant counts under ISAP.

Reentry Services


Operating expenses for Reentry Services decreased by $22.7 million during Six
Months 2022 compared to Six Months 2021 primarily due to a decrease of $30.6
million as a result of the sale of our youth business which was effective July
1, 2021. We also experienced a decrease of $2.2 million due to contract
termination. These decreases were partially offset by increases of $3.3 million
due to new/reactivated contracts, day reporting centers and programs including
the activation of our company-owned Tampa Residential Reentry Center in Tampa,
Florida in September 2021. Also partially offsetting the decreases was a net
aggregate increase of $6.8 million related to increased census levels at certain
of our community-based and reentry centers due to increased programming needs
and referrals.

International Services

Operating expenses for International Services decreased by $7.3 million in Six
Months 2022 compared to Six Months 2021 primarily due to foreign exchange rate
fluctuations of $6.1 million. We also experienced a net decrease of $1.2 million
primarily driven by the transition of our management contract for the Dungavel
House Immigration Removal Centre in the United Kingdom to the government
effective September 30, 2021.

                                       42
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Depreciation and Amortization

                                              % of Segment                    % of Segment
                                   2022          Revenue          2021          Revenue          $ Change       % Change
                                                                  (Dollars in thousands)
U.S. Secure Services             $ 41,896               5.9 %   $ 41,248                5.5 %   $      648            1.6 %
Electronic Monitoring and
Supervision Services               15,519               7.4 %     15,304               12.2 %          215            1.4 %
Reentry Services                    9,498               7.5 %      9,718                6.4 %         (220 )         (2.3 )%
International Services              1,041               1.1 %      1,153                1.1 %         (112 )         (9.7 )%
Total                            $ 67,954               6.0 %   $ 67,423                5.9 %   $      531            0.8 %




U.S. Secure Services

U.S. Secure Services depreciation and amortization expense increased slightly in
Six Months 2022 compared to Six Months 2021 primarily due to renovations at
certain of our company-owned facilities. The increase was partially offset by
decreases related to certain assets becoming fully depreciated and or amortized
as well as certain asset dispositions at our company-owned facilities.

Electronic Monitoring and Supervision Services

Depreciation and amortization expense increased slightly in Six Months 2022
compared to Six Months 2021 primarily due to certain leasehold improvements and
equipment additions.


Reentry Services

Reentry Services depreciation and amortization expense decreased slightly in Six
Months 2022 compared to Six Months 2021 primarily due to certain asset
dispositions at our company-owned centers.

International Services

Depreciation and amortization expense decreased slightly in Six Months 2022
compared to Six Months 2021 primarily due to foreign exchange rate fluctuations.

Other Unallocated Operating Expenses

                                        2022       % of Revenue        2021 

% of Revenue $ Change % Change

                                                                      (Dollars in thousands)
General and Administrative Expenses   $ 97,856               8.6 %   $ 103,167               9.0 %   $  (5,311 )         (5.1 )%


General and administrative expenses comprise substantially all of our other
unallocated operating expenses which primarily includes corporate management
salaries and benefits, professional fees and other administrative expenses.
General and administrative expenses decreased in Six Months 2022 compared to Six
Months 2021 by $5.3 million primarily due to one-time employee restructuring
expenses of $7.5 million incurred in Six Months 2021. Partially offsetting this
decrease were increased professional fees for financial and legal advisors
assisting us in reviewing potential asset sales as well as normal professional,
consulting and other administrative expenses.

Non-Operating Expenses

Interest Income and Interest Expense

                                   2022       % of Revenue        2021       % of Revenue       $ Change       % Change
                                                                 (Dollars in thousands)
Interest Income                  $ 11,190               1.0 %   $ 12,187               1.1 %   $     (997 )         (8.2 )%
Interest Expense                 $ 64,846               5.7 %   $ 63,897               5.6 %   $      949            1.5 %


Interest income decreased in Six Months 2022 compared to Six Months 2021
primarily due to the effect of foreign exchange rate fluctuations.

Interest expense increased in Six Months 2022 compared to Six Months 2021
primarily due to higher balances on the revolver component of our credit
facility. During 2021, we drew down significant amounts on our revolver as a
conservative precautionary step

                                       43
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to preserve liquidity, maintain financial flexibility, and obtain additional
funds for general corporate purposes. Also contributing to the increase was the
effect of increases in the LIBOR rate.



Gain on Extinguishment of Debt

                                   2022       % of Revenue       2021       

% of Revenue $ Change % Change

                                                                (Dollars in 

thousands)

Gain on Extinguishment of Debt   $      -               0.0 %   $ 4,693               0.4 %   $  (4,693 )      (100.0 )%




During Six Months 2021, we repurchased $22.5 million in aggregate principal
amount of our 5.125% Senior Notes due 2023 at a weighted average price of 90.68%
for a total cost of $20.4 million. We also repurchased $17.2 million in
aggregate principal amount of our 5.875% Senior Notes due 2024 at a weighted
average price of 79.51% for a total cost of $13.7 million. As a result of these
transactions, we recognized a gain on extinguishment of debt of $4.7 million,
net of the write-off of associated unamortized deferred loan costs.


Gain on Dispositions of Real Estate

                                       2022       % of Revenue        2021  

% of Revenue $ Change % Change

                                                                     (Dollars in thousands)
Gain on Dispositions of Real Estate   $ 3,053               0.3 %   $ 10,379               0.9 %   $  (7,326 )        (70.6 )%


The net gain in Six Months 2022 was primarily due to the sale of our Perry
County Correctional Facility
located in Alabama. The net gain in Six Months 2021
is primarily due to the sale of our interest in Talbot Hall, located in New
Jersey
, and the sale of our company-owned McCabe Center, located in Texas.

Income Tax Provision

                                   2022        Effective Rate        2021   

Effective Rate $ Change % Change

                                                                    (Dollars in thousands)
Provision for Income Taxes       $ 36,860                 29.3 %   $ 12,999                 12.8 %   $  23,861          183.6 %



The provision for income taxes and our effective tax rate increased during Six
Months 2022 compared to Six Months 2021 principally due to the Company electing
to terminate its REIT status at the end of 2021 and becoming a taxable C
corporation. In both Six Months 2022 and Six Months 2021, there was a net $1.9
million discrete tax expense. Included in the provision for income taxes in Six
Months 2022 and Six Months 2021 were a $2.0 million and $2.3 million discrete
tax expense related to stock compensation that vested during the respective
periods. We estimate our 2022 annual effective tax rate to be in the range of
approximately 27% to 29%, exclusive of any discrete items.


Equity in Earnings of Affiliates, net of Income Tax Provision


                                    2022       % of Revenue       2021      

% of Revenue $ Change % Change

                                                                  (Dollars in thousands)
Equity in Earnings of Affiliates   $ 2,715               0.2 %   $ 4,007               0.4 %   $  (1,292 )        (32.2 )%



Equity in earnings of affiliates, presented net of income tax provision,
represents the earnings of SACS and GEOAmey in the aggregate. Equity in earnings
of affiliates decreased during Six Months 2022 compared to Six Months 2021
primarily due to less favorable performance by GEOAmey.


Financial Condition



Capital Requirements

Our current cash requirements consist of amounts needed for working capital,
debt service, supply purchases, investments in joint ventures, and capital
expenditures related to either the development of new secure, processing and
reentry facilities, or the

                                       44
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maintenance of existing facilities. In addition, some of our management
contracts require us to make substantial initial expenditures of cash in
connection with opening or renovating a facility. Generally, these initial
expenditures are subsequently fully or partially recoverable as pass-through
costs or are billable as a component of the per diem rates or monthly fixed fees
to the contracting agency over the original term of the contract. Additional
capital needs may also arise in the future with respect to possible
acquisitions, other corporate transactions or other corporate purposes.

We currently have contractual commitments for a number of projects using Company
financing. We estimate that the cost of these existing active capital projects
will be approximately $30.3 million of which $9.5 million was spent through June
30, 2022. We estimate that the remaining capital requirements related to these
capital projects will be $20.8 million which will be spent through the remainder
of 2022.

We plan to fund all of our capital needs, including capital expenditures, from
cash on hand, cash from operations, borrowings under our Credit Facility and any
other financings which our management and Board, in their discretion, may
consummate. Currently, our primary source of liquidity to meet these
requirements is cash flow from operations and borrowings under our $900.0
million Revolver. Our management believes that our financial resources and
sources of liquidity will allow us to manage the continued impact of COVID-19 on
our business, financial condition, results of operations and cash flows. For the
full-year 2022, we have reduced our planned capital spending by deferring
capital expenditure projects where possible and closely managing our working
capital. We previously completed our annual budgeting process and have
identified cost savings at the corporate and facility level. Additionally, we
may from time to time pursue transactions to deleverage our balance sheet and
reduce our funded recourse debt, including our nearer term maturities consisting
of our 5.125% Senior Notes due 2023, our 5.875% Senior Notes due 2024 and our
Credit Facility, which transactions may include, subject to market conditions,
the proposed transactions set forth in the Transaction Support Agreement
discussed below, capital markets transactions, repurchases, redemptions,
exchanges or other refinancing of our existing debt, the potential sale of
additional assets and businesses and/or other strategic transactions. Our
management believes that cash on hand, cash flows from operations and
availability under our Credit Facility will be adequate to support our capital
requirements for 2022 as disclosed under "Capital Requirements" above. The
challenges posed by COVID-19, as well as the current political environment,
generally and on our business are continuing to evolve. Consequently, we will
continue to evaluate our financial position in light of future developments,
particularly those relating to the proposed transactions set forth in the
Transaction Support Agreement, the Executive Order and COVID-19.


Liquidity and Capital Resources

Indebtedness


Transaction Support Agreement

As previously reported, beginning in November 2021, we commenced discussions
with (i) the Noteholder Group of our Senior Notes, (ii) certain members of the
Term Lender Group under our Existing Credit Agreement and the Term Loans, and
(iii) the Agent and certain lenders that have provided the Revolving Credit
Loans and Revolving Credit Commitments under the Existing Credit Agreement
concerning a potential refinancing, exchange, recapitalization, or other
transaction or series of transactions to reduce our funded recourse debt and
address its nearer term maturities. We undertook these discussions on a
confidential basis pursuant to non-disclosure agreements with the applicable
members of the Noteholder Group and the Term Lender Group, and, in the case of
the Agent and the RCF Lenders, the confidentiality provisions of the Existing
Credit Agreement.

On July 18, 2022, we entered into a Transaction Support Agreement with the
Consenting Creditors setting forth principal terms for a Transaction to address
the upcoming maturities of our outstanding debt in 2023, 2024, and 2026.

The Transaction Support Agreement contemplates, among other things, the
following:

• Amending the Existing Credit Agreement to permit the indebtedness and

             liens contemplated to be incurred under the Exchange Credit
             Agreement, the New Notes and the 2028 Private Exchange Notes, among
             other modifications;


• Exchanging approximately 81% of the aggregate principal amount of

             Revolving Credit Commitments and the Term Loans outstanding 

under our

             Existing Credit Agreement for a combination of cash and new
             commitments and loans under a new credit agreement with a 

three-year

             maturity extension to March 2027;



        •    With respect to certain Consenting RCF Lenders who opt out of
             extending the maturity of their Revolving Credit Loans and Revolving
             Credit Commitments, the assignment of an agreed portion of such
             Revolving Credit Loans and Revolving Credit Commitments to certain
             other Consenting Creditors, with such other Consenting Creditors
             subsequently exchanging the Revolving Credit Loans thereby acquired
             for term loans under the Exchange Credit Agreement;




                                       45
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        •    Commencing the Exchange Offers and Consent Solicitations for any and
             all 2023 Notes and 2024 Notes; and



        •    Exchanging approximately $239 million of 2026 Notes held by
             Consenting 2026 Noteholders as of July 18, 2022, for newly issued
             9.500% Senior Second Lien Secured Notes maturing on December 31, 2028
             and amending certain provisions of the indenture for the 2026 Senior
             Notes.




In July 2022, Moody's Investors Service downgraded our issuer rating to Caa2 and
Standard & Poor's S&P Global downgraded our issuer rating to CC. These
downgrades were a direct result of the rating agencies' methodologies of how to
rate companies during the proposed Transaction. The ratings should be
re-assessed once the Transaction and new debt maturity profile discussed above
are finalized.

Refer to Note 15 – Subsequent Events of the Notes to Unaudited Consolidated
Financial Statements included in Part I, Item 1 of this Quarterly Report on Form
10-Q for further discussion.

6.50% Exchangeable Senior Notes due 2026


On February 24, 2021, our wholly-owned subsidiary, GEOCH, completed a private
offering of $230 million aggregate principal amount of 6.50% Exchangeable Notes
due 2026, which included the full exercise of the initial purchasers'
over-allotment option to purchase an additional $30 million aggregate principal
amount of Convertible Notes. The Convertible Notes will mature on February 23,
2026, unless earlier repurchased or exchanged. The Convertible Notes bear
interest at the rate of 6.50% per year plus an additional amount based on the
dividends paid by GEO on its common stock. Interest on the notes is payable
semi-annually in arrears on March 1 and September 1 of each year, beginning on
September 1, 2021.

Subject to certain restrictions on share ownership and transfer, holders may
exchange the notes at their option prior to the close of business on the
business day immediately preceding November 25, 2025, but only under the
following circumstances: (1) during the five consecutive business day period
after any five consecutive trading day period, or the measurement period, in
which the trading price per $1,000 principal amount of notes for each trading
day of such measurement period was less than 98% of the product of the last
reported sale price of our common stock and the exchange rate for the notes on
each such trading day; or (2) upon the occurrence of certain specified corporate
events. On or after November 25, 2025, until the close of business on the second
scheduled trading day immediately preceding the maturity date of the notes,
holders may exchange their notes at any time, regardless of the foregoing
circumstances. Upon exchange of a note, we will pay or deliver, as the case may
be, cash or a combination of cash and shares of our common stock. As of June 30,
2022, conditions had not been met to exchange the notes.

Upon conversion, we will pay or deliver, as the case may be, cash or a
combination of cash and shares of common stock. The initial conversion rate is
108.4011 shares of common stock per $1,000 principal amount of Convertible Notes
(equivalent to an initial conversion price of approximately $9.225 per share of
common stock). The conversion rate will be subject to adjustment in certain
events. If GEO or GEOCH undergoes a fundamental change, holders may require
GEOCH to purchase the notes in whole or in part for cash at a fundamental change
purchase price equal to 100% of the principal amount of the notes to be
purchased, plus accrued and unpaid interest, if any, to, but excluding, the
fundamental change purchase date.

We used the net proceeds from this offering, including the exercise in full of
the initial purchasers' over-allotment option to fund the redemption of the then
outstanding amount of approximately $194.0 million of our 5.875% Senior Notes
due 2022, to re-purchase additional senior notes and we used the remaining net
proceeds to pay related transaction fees and expenses, and for general corporate
purposes of the Company. As a result of the redemption, deferred loan costs in
the amount of approximately $0.7 million were written off to loss on
extinguishment of debt during the six months ended June 30, 2021.

The notes were offered in the United States only to persons reasonably believed
to be "qualified institutional buyers" pursuant to Rule 144A under the
Securities Act, and outside of the United States to non-U.S. persons in
compliance with Regulation S under the Securities Act. Neither the notes nor any
of the shares of the Company's common stock issuable upon exchange of the notes,
if any, have been, or will be, registered under the Securities Act and, unless
so registered, may not be offered or sold in the United States, except pursuant
to an applicable exemption from the registration requirements under the
Securities Act.

Credit Agreement


On June 12, 2019, we entered into Amendment No. 2 to the Third Amended and
Restated Credit Agreement (the "Credit Agreement") by and among the refinancing
lenders party thereto, the other lenders party thereto, GEO and GEOCH and the
administrative agent. Under the amendment, the maturity date of the revolver was
extended to May 17, 2024. The borrowing capacity under the amended

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revolver remains at $900.0 million, and its pricing remains unchanged currently
bearing interest at LIBOR plus 2.25%. As a result of the amendment, we incurred
a loss on extinguishment of debt of $1.2 million during 2019 related to certain
unamortized deferred loan costs. Additionally, loan costs of $4.7 million were
incurred and capitalized in connection with the amendment.

As of June 30, 2022, we had approximately $758.0 million in aggregate borrowings
outstanding under our term loan, approximately $735.0 million in borrowings
under our revolver, and approximately $99.0 million in letters of credit which
left approximately $66.0 million in additional borrowing capacity under the
revolver. The weighted average interest rate on outstanding borrowings under the
Credit Agreement as of June 30, 2022 was 3.20%.

In 2020 and 2021, we elected to draw down significant amounts in borrowings
under the revolver component of our credit facility as a conservative
precautionary step to preserve liquidity, maintain financial flexibility, and
obtain additional funds for general corporate purposes.

Refer to Note 10 – Debt of the Notes to Unaudited Consolidated Financial
Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for
further discussion.


Australia - Ravenhall

In connection with a design and build project agreement with the State of
Victoria, in September 2014, we 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 AUD
791.0 million, or approximately $545.2 million, based on exchange rates as of
June 30, 2022. In accordance with the terms of the contract, upon completion and
commercial acceptance of the project in late 2017, the State of Victoria made a
lump sum payment of AUD310 million, or approximately $213.7 million, based on
exchange rates as of June 30, 2022. The term of the Construction Facility was
through September 2020 and bore interest at a variable rate quoted by certain
Australian banks plus 200 basis points. On May 22, 2019, we completed an
offering of AUD 461.6 million, or $318.2 million, based on exchange rates as of
June 30, 2022, aggregate principal amount of 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 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.

Other


In August 2020, we entered into two identical promissory 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
promissory notes are through September 1, 2034 and bear interest at LIBOR plus
200 basis points and are payable in monthly installments plus interest. We have
entered into interest rate swap agreements to fix the interest rate to 4.22%.
Included in the balance at June 30, 2022 is $0.6 million of deferred loan costs
incurred in the transaction. Refer to Note 9 - Derivative Financial Instruments
and Note 10 - Debt of the Notes to Unaudited Consolidated Financial Statements
included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further
discussion.

In addition to the debt outstanding under the Credit Facility, the 6.50%
Exchangeable Notes due 2026, the 6.00% Senior Notes due 2026, the 5.125% Senior
Notes due 2023, and the 5.875% Senior Notes due 2024, we also have significant
debt obligations which, although these obligations are non-recourse to us,
require cash expenditures for debt service. Our significant debt obligations
could have material consequences. See "Risk Factors-Risks Related to Our High
Level of Indebtedness" in Item 1A of our Annual Report on Form 10-K for the year
ended December 31, 2021. We are exposed to various commitments and contingencies
which may have a material adverse effect on our liquidity. We also have
guaranteed certain obligations for certain of our international subsidiaries.
These non-recourse obligations, commitments and contingencies and guarantees are
further discussed in our Annual Report on Form 10-K for the year ended December
31, 2021.

Debt Repurchases

On August 16, 2019, our Board authorized us to repurchase and/or retire a
portion of our 6.00% Senior Notes due 2026, the 5.875% Senior Notes due 2024,
the 5.125% Senior Notes due 2023 and the 5.875% Senior Notes due 2022
(collectively the "GEO Senior Notes") and our term loan under our 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. On February 11, 2021,
our Board authorized a new repurchase program for repurchases/retirements of
part of the above referenced GEO Senior Notes and term loan, subject to certain
limitations up to an aggregate maximum of $100.0 million through December 31,
2022. During the first quarter of 2021, the 5.875% Senior Notes due 2022 were
redeemed in connection with the offering of the Convertible Notes discussed
above.

During the six months ended June 30, 2021, we repurchased $22.5 million in
aggregate principal amount of our 5.125% Senior Notes due 2023 at a weighted
average price of 90.68% for a total cost of $20.4 million. Additionally, we
repurchased $17.2 million in aggregate principal amount of our 5.875% Senior
Notes due 2024 at a weighted average price of 79.51% for a total cost of $13.7

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million. As a result of these repurchases, we recognized a net gain on
extinguishment of debt of $4.7 million, net of the write-off of associated
unamortized deferred loan costs. There were no debt repurchases during the six
months ended June 30, 2022.

Refer to Note 10 – Debt of the Notes to Unaudited Consolidated Financial
Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for
further information on our indebtedness.


We consider opportunities for future business and/or asset acquisitions or
dispositions as we deem appropriate when market conditions present
opportunities. If we are successful in our pursuit of any new projects, our cash
on hand, cash flows from operations and borrowings under the existing Credit
Facility may not provide sufficient liquidity to meet our capital needs and we
could be forced to seek additional financing or refinance our existing
indebtedness. There can be no assurance that any such financing or refinancing
would be available to us on terms equal to or more favorable than our current
financing terms, or at all. Additionally, the magnitude, severity and duration
of the COVID-19 pandemic may negatively impact the availability of opportunities
for future business and/or asset acquisitions or asset dispositions and market
conditions generally. In the future, our access to capital and ability to
compete for future capital intensive projects will also be dependent upon, among
other things, our ability to meet certain financial covenants in the indenture
governing the 5.125% Senior Notes due 2023, the indenture governing the 5.875%
Senior Notes due 2024, the indenture governing the 6.00% Senior Notes due 2026,
the indenture governing our Convertible Notes and our Credit Agreement. A
substantial decline in our financial performance could limit our access to
capital pursuant to these covenants and have a material adverse effect on our
liquidity and capital resources and, as a result, on our financial condition and
results of operations. In addition to these foregoing potential constraints on
our capital, a number of state government agencies have been suffering from
budget deficits and liquidity issues. While we were in compliance with our debt
covenants as of June 30, 2022 and we expect to continue to be in compliance with
our debt covenants, if these constraints were to intensify, our liquidity could
be materially adversely impacted as could our ability to remain in compliance
with these debt covenants.

We may from time to time seek to purchase or retire our outstanding senior notes
through repurchases, redemptions and/or exchanges for equity securities, in open
market purchases, privately negotiated transactions or otherwise. Such
repurchases, redemptions or exchanges, if any, will depend on prevailing market
conditions, our liquidity requirements, contractual restrictions and other
factors. The amounts involved may be material.


Guarantor Financial Information

GEO’s Convertible Notes, 6.00% Senior Notes due 2026, 5.125% Senior Notes due
2023 and the 5.875% Senior Notes due 2024 are fully and unconditionally
guaranteed on a joint and several senior unsecured basis by certain of our
wholly-owned domestic subsidiaries (the “Subsidiary Guarantors”).


Summarized financial information is provided for The GEO Group, Inc. ("Parent")
and the Subsidiary Guarantors on a combined basis in accordance with SEC
Regulation S-X Rules 3-10 and 13-01. The accounting policies used in the
preparation of this summarized financial information are consistent with those
elsewhere in the condensed consolidated financial statements of the Company,
except that intercompany transactions and balances of the Parent and Subsidiary
Guarantor entities with non-guarantor entities have not been eliminated.
Intercompany transactions between the Parent and Subsidiary Guarantors have been
eliminated and equity in earnings from and investments in non-guarantor
subsidiaries have not been presented.

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