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, budgets, projected costs and plans and objectives of management for future operations, 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 timely build and/or open facilities as planned, profitably manage such facilities and successfully integrate such facilities into our operations without substantial additional costs;

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

• 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;

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

• our ability to maintain occupancy rates at our facilities;

• an increase in unreimbursed labor rates;

• our ability to expand, diversify and grow our correctional, detention, mental health, residential treatment, re-entry, community-based services, youth 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 and meet any performance standards required by such management contracts;

• our ability to control operating costs associated with contract start-ups;

• 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 estimate the government's level of dependency on privatized correctional services;

• our ability to accurately project the size and growth of the U.S. and international privatized corrections industry;

• our ability to successfully respond to delays encountered by states privatizing correctional services and cost savings initiatives implemented by a number of states;

• our ability to develop long-term earnings visibility;

• our ability to identify suitable acquisitions, and to successfully complete and integrate such acquisitions on satisfactory terms, and estimate the synergies to be achieved as a result of such acquisitions;

• our exposure to the impairment of goodwill and other intangible assets as a result of our acquisitions;

• our ability to successfully conduct our operations through joint ventures;

• our exposure to political and economic instability and other risks impacting our international operations;

• our exposure to risks impacting our information systems, including those that may cause an interruption, delay or failure in the provision of our services;

• our exposure to rising general insurance costs;

• our exposure to state and federal income tax law changes internationally and domestically and our exposure as a result of federal and international examinations of our tax returns or tax positions;

• our exposure to claims for which we are uninsured;

• our exposure to rising employee and inmate medical costs;

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

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

• the ability of our government customers to secure budgetary appropriations to fund their payment obligations to us and continue to operate under our existing agreements and/ or renew our existing agreements;

• our ability to consummate the acquisition of the partnership interests in MCF during the third quarter of 2012;

• our ability to pay quarterly dividends consistent with our expectations as to timing and amounts;

• our ability to comply with government regulations and applicable contractual requirements;

• our ability to acquire, protect or maintain our intellectual property; and

• other factors contained in our filings with the Securities and Exchange Commission, or the SEC, including, but not limited to, those detailed in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K 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. All subsequent written and oral forward-looking statements attributable to us, or persons 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" and under "Part I - Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended January 1, 2012. The discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q. For the purposes of this discussion and analysis, we refer to the thirteen weeks ended April 1, 2012 as "First Quarter 2012," and we refer to the thirteen weeks ended April 3, 2011 as "First Quarter 2011".

We are a leading provider of government-outsourced services specializing in the management of correctional, detention, mental health, residential treatment and re-entry facilities, and the provision of community based services and youth services in the United States, Australia, South Africa, the United Kingdom and Canada. We operate a broad range of correctional and detention facilities including maximum, medium and minimum security prisons, immigration detention centers, minimum security detention centers, mental health, residential treatment and community based re-entry facilities. We offer counseling, education and/or treatment to inmates with alcohol and drug abuse problems at most of the domestic facilities we manage. We are also a provider of innovative compliance technologies, industry-leading monitoring services, and evidence-based supervision and treatment programs for community-based parolees, probationers and pretrial defendants. Additionally, we have an exclusive contract with the U.S. Immigration and Customs Enforcement, which we refer to as ICE, to provide supervision and reporting services designed to improve the participation of non-detained aliens in the immigration court system. 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 that maximize security and efficiency. We also provide secure transportation services for offender and detainee populations as contracted domestically and in the United Kingdom through our joint venture, GEO Amey PECS Ltd., which we refer to as GEOAmey.

We acquired two companies, Cornell Companies, Inc. and BII Holding Corporation, during the past two years that have had, and we believe will continue to have, a significant impact on our business. As a result of these acquisitions, we expect to benefit from the increased scale and diversification of service offerings. Our acquisition in August 2010 of Cornell Companies, Inc., which we refer to as Cornell and we refer to this transaction as the Cornell Acquisition, added scale to our presence in the U.S. correctional and detention market, and combined Cornell's adult community-based and youth treatment services into GEO Care's behavioral healthcare services platform to create a leadership position in this growing market. Our acquisition on February 10, 2011 of BII Holding, the indirect owner of 100% of the equity interests of B.I. Incorporated, which we refer to as BI and refer to this transaction as the BI Acquisition, provides us with the ability to offer turn-key solutions to our customers in managing the full lifecycle of an offender from arraignment to reintegration into the community, which we refer to as the corrections lifecycle. As of April 1, 2012, our worldwide operations included the management and/or ownership of approximately 79,000 beds at 113 correctional, detention and residential treatment facilities, including idle facilities and projects under development and also included the provision of monitoring of more than 70,000 offenders in a community-based environment on behalf of approximately 900 federal, state and local correctional agencies located in all 50 states.

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

• our correctional and detention management services involve the provision of security, administrative, rehabilitation, education, health and food services, primarily at adult male correctional and detention facilities;

• our mental health and residential treatment services involve working with governments to deliver quality care, innovative programming and active patient treatment, primarily in state-owned mental healthcare facilities;

• our community-based services involve supervision of adult parolees and probationers and the provision of temporary housing, programming, employment assistance and other services with the intention of the successful reintegration of residents into the community;

• our youth services include residential, detention and shelter care and community-based services along with rehabilitative, educational and treatment programs;

• our monitoring services provide our governmental clients with innovative compliance technologies, industry-leading monitoring services, and evidence-based supervision and treatment programs for community-based parolees, probationers and pretrial defendants; including services provided under the Intensive Supervision Appearance Program, which we refer to as ISAP, to ICE for the provision of services designed to improve the participation of non-detained aliens in the immigration court system;

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

• we provide secure transportation services for offender and detainee populations as contracted domestically, and internationally, our joint venture GEOAmey is responsible for providing prisoner escort and custody services in the United Kingdom, including all of Wales and all of England except London and East of England.

We maintained an average company-wide facility occupancy rate of 94.7% for the thirteen weeks ended April 1, 2012, excluding facilities that are either idle or under development.

Reference is made to Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on March 1, 2012, for further discussion and analysis of information pertaining to our financial condition and results of operations for the fiscal year ended January 1, 2012.

Fiscal 2012 Developments

Facility Construction

As of April 1, 2012, we were in the process of completing the new 650-bed expansion of Adelanto ICE Processing Center West in Adelanto, California. We will provide services to ICE through an Inter-Governmental Agreement, or IGA, with the City of Adelanto and expect to begin the intake of detainees by August 2012.

Contract Awards, Activations and Terminations

The following contract awards and facility activations are expected to occur during fiscal year 2012:

On June 1, 2011, we announced that the City of Adelanto, California had signed a contract with us for the housing of federal immigration detainees at our 650-bed Detention Facility in Adelanto, California, which we purchased from the City of Adelanto in June of 2010, and at a 650-bed facility expansion, which we are constructing, to be located on land immediately adjacent to the facility. We completed the renovation and retrofitting of the existing 650-bed facility and began the initial intake of 650 detainees in August 2011. We expect to complete the new 650-bed expansion and begin the intake of the additional 650 detainees by August 2012.

On April 10, 2012, we announced that the California Department of Corrections and Rehabilitation, which we refer to as the CDCR, rescinded its previous notice of termination regarding our management contract for the 625-bed Golden State Correctional Facility. We will continue to manage this contract under our agreement with CDCR which currently expires in December 2012.

The following contract terminations occurred during fiscal year 2012:

On March 31, 2012, our contract for the management of the 130-bed Migrant Operations Center at Guantanamo Bay NAS, Cuba terminated and was transferred to another operator. We do not expect that the termination of this contract will have a material impact on our financial position, results of operations and/ or cash flows.

On April 19, 2012, the Company announced the discontinuation of its managed-only contract with the State of Mississippi, Department of Corrections for the 1,500-bed East Mississippi Correctional Facility effective July 19, 2012. The discontinuation of the contract is not expected to have a material impact on the Company's financial position, results of operations and/ or cash flows.

We are currently marketing approximately 7,000 vacant beds at eight of our idle facilities to potential customers. The carrying values of these idle facilities totaled $268.2 million as of April 1, 2012, excluding equipment and other assets that can be easily transferred for use at other facilities.

Partnership Interests in Municipal Corrections Finance, L.P.

On April 24, 2012, we signed a definitive agreement to purchase 100% of the partnership interests in Municipal Corrections Finance, L.P., which we refer to as MCF, for approximately $27 million in cash plus the release of approximately $10 million in cash held in escrow for the benefit of MCF. Closing of the transaction is subject to third party approvals, including consent of the MCF Bond trustee. We expect to close the transaction during our third fiscal quarter of 2012.

Approval of The GEO Group Inc. 2011 Employee Stock Purchase Plan

On May 4, 2012, our shareholders approved The GEO Group Inc. 2011 Employee Stock Purchase Plan. The Compensation Committee and Board of Directors had previously approved the Plan on May 4, 2011 and the Plan became effective on July 9, 2011, subject to obtaining shareholder approval. Eligible employees were allowed to participate in the Plan as of July 9, 2011, but no shares of common stock were issuable pursuant to the Plan prior to obtaining shareholder approval. Shares will be issued to participating employees for the pre-shareholder approval offering periods on June 29, 2012 and shares will be issued to participating employees for the post-shareholder approval offering periods on the last day of each month.

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 at 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 thirteen weeks ended April 1, 2012, we did not experience any changes in estimates inherent in the preparation of our financial statements and, at this time, do not anticipate any changes during the fiscal year ending December 30, 2012. A summary of our significant accounting policies is contained in Note 1 to our financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2012.

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 Thirteen Weeks Ended April 1, 2012 and Thirteen Weeks Ended April 3, 2011

For the purposes of the discussion below, "First Quarter 2012" refers to the thirteen weeks ended April 1, 2012 and "First Quarter 2011" refers to the thirteen weeks ended April 3, 2011.

Revenues



                                                      % of                        % of
                                        2012        Revenue         2011        Revenue       $ Change       % Change
                                                                   (Dollars in thousands)
U.S. Corrections & Detention          $ 246,119         59.7 %    $ 241,630         61.7 %    $   4,489            1.9 %
GEO Care                                109,693         26.6 %       96,889         24.7 %       12,804           13.2 %
International Services                   56,530         13.7 %       53,128         13.6 %        3,402            6.4 %
Facility Construction & Design               -            -  %          119           -  %         (119 )       (100.0 )%

Total                                 $ 412,342        100.0 %    $ 391,766        100.0 %    $  20,576            5.3 %

U.S. Corrections & Detention

Revenues increased in First Quarter 2012 compared to First Quarter 2011 partially due to aggregate increases of $8.8 million due to the activation and intake of inmates at the 650-bed Adelanto ICE Processing Center East ("Adelanto East") in August 2011, the 1,500-bed Riverbend Correctional Facility ("Riverbend") in December 2011, the Indiana Short Term Offender Program ("STOP Program") in March 2011 and the 600-bed Karnes Civil Detention Center ("Karnes") in March 2012. We also experienced aggregate increases in revenues of $6.1 million at certain of our facilities primarily due to increases in population and/ or rates. These increases were partially offset by an aggregate decrease of $12.7 million due to contract terminations and other decreases related to lower rates and populations at some facilities.

The number of compensated mandays in U.S. Corrections & Detention facilities was 4.3 million in First Quarter 2012 and in First Quarter 2011. We experienced an aggregate increase of approximately 220,000 man days as a result of our new contracts discussed above and also as a result of population increases at certain facilities. These increases were offset by decreases resulting from contract terminations. 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. Detention & Corrections facilities was 95.0% and 93.3% of capacity in First Quarter 2012 and First Quarter 2011 respectively, excluding idle facilities.

GEO Care

The increase in revenues for GEO Care in First Quarter 2012 compared to First Quarter 2011 is primarily attributable to a full quarter of revenues generated by BI compared to the partial month of revenues in First Quarter 2011 which contributed to an increase of $14.3 million. We also experienced an increase in revenues of $1.9 million from the opening of Montgomery County Mental Health Treatment Facility ("Montgomery County") in March 2011. These increases were partially offset by a decrease in revenues of $3.9 million related to our terminated contracts.

International Services

Revenues for our International Services segment during First Quarter 2012 increased by $3.4 million over First Quarter 2011 primarily due to the following factors: (i) increases of $1.4 million as a result of foreign exchange rate fluctuations; (ii) aggregate increases at our Australian subsidiary of $2.3 million related to contractual increases linked to the inflationary index and the provision of additional services under certain contracts; and (iii) an increase of $2.0 million due to the assumption of operations at the 217-bed Dungavel House Immigration Removal Centre ("Dungavel") on September 25, 2011. These increases were partially offset by a decrease in revenues of $2.4 million related to our terminated contract for the operation of the Campsfield House Removal Centre ("Campsfield House").

Operating Expenses



                                                     % of                          % of
                                                   Segment                       Segment
                                      2012         Revenues         2011         Revenues       $ Change       % Change
                                                                   (Dollars in thousands)
U.S. Corrections & Detention        $ 183,629           74.6 %    $ 172,927           71.6 %    $  10,702            6.2 %
GEO Care                               83,713           76.3 %       77,694           80.2 %        6,019            7.7 %
International Services                 51,786           91.6 %       48,649           91.6 %        3,137            6.4 %
Facility Construction & Design             -              -  %           16           13.4 %          (16 )       (100.0 )%

Total                               $ 319,128           77.4 %    $ 299,286           76.4 %    $  19,842            6.6 %

Operating expenses consist of those expenses incurred in the operation and management of our correctional, detention and mental health and GEO Care facilities and expenses incurred in our Facility Construction & Design segment.

U.S. Corrections & Detention

The increase in operating expenses for U.S. Corrections & Detention reflects the following: (i) the activation and intake of inmates at Adelanto East, Riverbend, STOP Program and Karnes which contributed an aggregate increase to operating expenses of $10.3 million, including $3.6 million in nonrecurring start-up costs; (ii) increases of $3.5 million at certain of our facilities primarily related to higher levels of required staffing and additional medical costs;
(iii) increases of $4.5 million at facilities discussed previously primarily related to population increases; and (iv) other individually insignificant increases netting to $2.2 million. Overall, we experienced an increase in operating expenses as a percentage of revenue related to contractual salary adjustments and medical costs. These increases were partially offset by aggregate decreases in operating expenses of $9.8 million due to contract terminations.

GEO Care

Operating expenses for GEO Care increased $6.0 million during First Quarter 2012 from First Quarter 2011 primarily due to BI which was operating for a full quarter during First Quarter 2012 compared to a partial quarter during First Quarter 2011. We also experienced an increase in operating expenses during First Quarter 2012 for the operation of Montgomery County which opened in March 2011. These increases were partially offset by a decrease in operating expenses of $3.4 million for terminated contracts. During First Quarter 2012, we experienced a decrease in operating expenses as a percentage of revenue due to improved margins resulting from our acquisition of BI and also due to nonrecurring start up costs incurred in First Quarter 2011 for the opening of Montgomery County.

International Services

Operating expenses for our International Services segment during First Quarter 2012 increased $3.1 million over the prior year due to: (i) the impacts of foreign currency exchange rates of $1.1 million; and (ii) an increase in operating expenses at our Australian subsidiary of $1.5 million related to increases in population and additional services provided at certain of those facilities. We also experienced a net increase of $0.5 million in operating expenses in the United Kingdom due to the opening of Dungavel partially offset by the termination of our contract for the management of Campsfield House.

Depreciation and Amortization



                                                      % of                        % of
                                                     Segment                     Segment
                                         2012        Revenue         2011        Revenue        $ Change       % Change
                                                                    (Dollars in thousands)
U.S. Corrections & Detention           $ 15,302           6.2 %    $ 12,930           5.4 %    $    2,372           18.3 %
GEO Care                                  7,356           6.7 %       5,345           5.5 %         2,011           37.6 %
International Services                      557           1.0 %         527           1.0 %            30            5.7 %
Facility Construction & Design               -             -             -             -               -              -

Total                                  $ 23,215           5.6 %    $ 18,802           4.8 %    $    4,413           23.5 %
. . .