UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
ý | | ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the Fiscal Year Ended December 31, 2004 |
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OR |
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o | | TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-14472
Cornell Companies, Inc. 401(k) Profit Sharing Plan
CORNELL COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware | | 76-0433642 |
(State or other jurisdiction
of incorporation or organization) | | (I.R.S. Employer
Identification No.) |
| | |
1700 West Loop South, Suite 1500, Houston, Texas | | 77027 |
(Address of Principal Executive Offices) | | (Zip Code) |
| | |
Registrant’s telephone number, including area code: | | (713) 623-0790 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Administrator of
Cornell Companies, Inc. 401(k) Profit Sharing Plan:
In our opinion, the accompanying statement of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of Cornell Companies, Inc. 401(k) Profit Sharing Plan (the “Plan”) at December 31, 2004 and the changes in net assets available for benefits for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule G Part III – Nonexempt Transactions for the year ended December 31, 2004 and the supplemental schedule H, line 4i – schedule of assets (held at end of year) as of December 31, 2004, are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules are subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.
LJ Mosby, P.C.
Houston, Texas
July 13, 2005
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Administrator of
Cornell Companies, Inc. 401(k) Profit Sharing Plan:
In our opinion, the accompanying statement of net assets available for benefits presents fairly, in all material respects, the net assets available for benefits of Cornell Companies, Inc. 401(k) Profit Sharing Plan (the “Plan”) at December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. This financial statement is the responsibility of the Plan’s management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit of this statement in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
June 28, 2004
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CORNELL COMPANIES, INC. 401(k) PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2004 AND 2003
| | 2004 | | 2003 | |
ASSETS: | | | | | |
Investments (at fair value) | | $ | 21,370,231 | | $ | 18,795,371 | |
| | | | | |
Receivables: | | | | | |
Employee contributions | | 76,839 | | 71,535 | |
Employer contributions | | 52,041 | | 27,765 | |
Due from brokers | | 7,226 | | ¾ | |
Total receivables | | 136,106 | | 99,300 | |
| | | | | |
Total assets | | 21,506,337 | | 18,894,671 | |
| | | | | |
LIABILITIES: | | | | | |
Corrective distributions payable | | (83,217 | ) | (102,755 | ) |
Due to brokers | | (76,089 | ) | (— | ) |
Expenses payable | | (8,310 | ) | (2,275 | ) |
| | | | | |
Total liabilities | | (167,616 | ) | (105,030 | ) |
| | | | | |
NET ASSETS AVAILABLE FOR PLAN BENEFITS | | $ | 21,338,721 | | $ | 18,789,641 | |
The accompanying notes are an integral part of these financial statements.
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CORNELL COMPANIES, INC. 401(k) PROFIT SHARING PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2004
| | 2004 | |
| | | |
ADDITIONS: | | | |
Net appreciation in fair value of investments | | $ | 1,270,534 | |
Dividends | | 326,810 | |
Interest | | 84,397 | |
Employee contributions | | 3,058,585 | |
Employer contributions | | 1,225,971 | |
Employee rollover contributions | | 81,968 | |
| | | |
Total additions | | 6,048,265 | |
| | | |
DEDUCTIONS: | | | |
Benefit payments and withdrawals | | (3,337,739 | ) |
Corrective distributions | | (83,217 | ) |
Plan expenses | | (78,229 | ) |
| | | |
Total deductions | | (3,499,185 | ) |
| | | |
INCREASE (DECREASE) IN NET ASSETS AVAILABLE FOR PLAN BENEFITS | | 2,549,080 | |
| | | |
NET ASSETS AVAILABLE FOR PLAN BENEFITS, BEGINNING OF YEAR | | 18,789,641 | |
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NET ASSETS AVAILABLE FOR PLAN BENEFITS, END OF YEAR | | $ | 21,338,721 | |
| | | | | |
The accompanying notes are an integral part of these financial statements.
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CORNELL COMPANIES, INC. 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
1. DESCRIPTION OF THE PLAN
General
The Cornell Companies, Inc. 401(k) Profit Sharing Plan (the Plan) was established on January 1, 1993, and is a trustee-defined contribution plan in which generally all employees of Cornell Companies, Inc., and its subsidiaries (the Company), are eligible to participate. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). The following description of the Plan provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
Plan Administration and Trustee
The Company is the Plan’s administrator and trustee. The board of directors of the Company appoints an individual to be responsible for the administration of the Plan. Effective October 11, 2002, the Company appointed Reliance Trust Company as the Plan’s asset custodian and DailyAccess.Com as the Plan’s record keeper.
Eligibility and Contributions
Effective September 1, 2000, all employees except leased employees are eligible to participate in the Plan with no service requirements and can enroll in the Plan immediately. Prior to September 1, 2000, all employees, except leased employees, who had completed one year of service were eligible to participate in the Plan and could enroll in the Plan quarterly.
Employees may elect to contribute from 1 percent to 20 percent of their compensation, as defined, up to the maximum allowed under Internal Revenue Service (IRS) guidelines. The Company makes matching contributions equal to 50 percent of the participants’ elective deferrals for the Plan year up to 6 percent of the participant’s eligible compensation. Participant rollover contributions from other qualified plans are allowed under the Plan.
Participant Accounts and Investment Options
Each participating employee’s share of the net assets of the Plan is segregated in an individual account. Participants exercise control over the types of investments made on their behalf, provided that such investments shall be invested only in investment funds designated by the Plan sponsor. Each participant may elect to invest his/her contribution and the Company’s contributions made on the participant’s behalf in any one or more of the investment funds. Participants can direct the investment on their individual accounts among seventeen mutual funds and a Cornell Unitized Stock Fund. Investment income or loss is allocated daily to a participant’s account in the same ratio as the participant’s investment in each fund bears to the total of all participants’ investments in each fund.
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Vesting
All participant contributions are 100 percent vested and nonforfeitable at all times. Participants become vested in the Company’s contributions to the Plan as follows:
Years of Service | | Hired Before 9/1/00
Vested Percent | | Hired After 8/31/00
Vested Percent | |
| | | | | |
1 | | 0 | % | 0 | % |
2 | | 20 | % | 0 | % |
3 | | 100 | % | 100 | % |
Loans
A participant may borrow from the Plan up to the lesser of $50,000 or 50 percent of the participant’s vested account balance with a minimum loan requirement of $1,000. The loans are collateralized by the participant’s vested account balance. Interest is charged at the current commercial lending rate and is credited to the participant’s account. The participant is entitled to no more than one loan concurrently.
Payment of Benefits
Benefits are payable to a participant upon separation from service, total and permanent disability, reaching age 59 1/2, retirement or death in accordance with the aforementioned vesting schedule. In addition, hardship distributions are permitted if certain Plan provisions are met. Distributions are made in the form of lump-sum payments. No other optional form of payment is available.
Effective September 1, 2000, an early retirement option was added to the Plan. Upon completion of five years of service and attained age 55, a participant may elect to retire from the Company and begin receiving benefits.
Also, a participant who has attained the normal retirement age and who has not separated from service may receive a distribution of his or her vested account balance.
Forfeitures
Forfeitures of any Company contributions are to be used either to reduce the Company’s contributions to the Plan or to pay the expenses of the Plan. As of December 31, 2004 and 2003, $77,729 and $57,728, respectively, of forfeitures are included in net assets available for benefits. In 2004 and 2003, $72,194 and $78,382, respectively, of forfeitures were utilized by the Company to pay the expenses of the Plan and reduce Company contributions.
Plan Termination
The Company currently intends to continue the Plan for the benefit of its employees but reserves the right to discontinue contributions and/or terminate the Plan, subject to the provisions of ERISA. In the event of a complete termination of the Plan, the affected participants shall be fully vested in all amounts allocated to their accounts, and such amounts shall be nonforfeitable.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Plan are prepared on the accrual basis of accounting. Benefit payments are recorded when paid.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires the Plan’s management to use estimates and assumptions that affect the accompanying financial statements and disclosures. Actual results could differ from those estimates.
Valuation of Investments
Investments in mutual funds (inclusive of the Cornell Unitized Stock Fund) are stated at fair value based on published market prices. The Company common stock is valued at its quoted market price. Participant loans are valued at cost which approximates fair value. Purchases and sales are recorded on a trade-date basis. Interest income is recorded as earned and dividends are recorded on the ex-dividend date. Realized gains (losses) on the sale of mutual funds, unrealized appreciation (depreciation) in fair value of mutual funds, and interest and dividends are shown as net investment income (loss) from mutual funds in the statements of changes in net assets available for plan benefits. Realized gains (losses) on the sale of common stock and unrealized appreciation (depreciation) in fair value of common stock are shown as net appreciation (depreciation) in fair value of investments in the statement of changes in net assets available for plan benefits.
Expenses
Administrative and other expenses of the Plan are generally paid first from Plan forfeitures and any excesses would be paid by the Company. Expenses paid by the Company in 2004 and 2003 were not significant.
3. RISKS AND UNCERTAINTIES
The Plan provides for investment in mutual funds and Company common stock. Investment securities, in general, are exposed to various risks, such as interest rate, credit and overall market volatility risk. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term.
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4. INVESTMENTS
Individual investments that exceed 5 percent of net assets available for benefits at December 31, 2004 and 2003 are as follows:
2004 - | | | |
AIM Balanced Fund | | $ | 1,363,802 | |
AIM Cash Reserve Fund | | 5,852,835 | |
AIM Constellation Fund | | 1,785,004 | |
Goldman Sachs Small Cap Value Fund | | 2,531,575 | |
Janus Advisor International Growth | | 1,624,798 | |
Oppenheimer Main St. Growth and Income – N Shares | | 1,724,033 | |
Cornell Unitized Stock Fund | | 1,541,671 | |
Participant Loans | | 1,098,372 | |
| | | |
2003 - | | | |
AIM Balanced Fund | | $ | 1,447,758 | |
AIM Cash Reserve Fund | | 4,803,217 | |
AIM Constellation Fund | | 1,946,009 | |
Goldman Sachs Small Cap Value Fund | | 2,501,146 | |
Janus Advisor International Growth | | 1,532,427 | |
Oppenheimer Select S&P 500 Index | | 1,710,401 | |
Cornell Unitized Stock Fund | | 1,624,703 | |
| | | | | |
5. FEDERAL INCOME TAXES
Effective January 1, 1993, the Company adopted the Cornell Companies, Inc. 401(k) Profit Sharing Plan (the Plan). The Plan received a favorable determination letter on March 8, 1994. The Plan has since been amended; however, the Company believes that the Plan is being operated in compliance with the applicable requirements of the Internal Revenue Code of 1986, as amended. Therefore, the Company believes that the Plan was qualified and the related trust was tax-exempt as of December 31, 2004 and 2003.
6. CORRECTIVE DISTRIBUTIONS PAYABLE
The Plan is subject to certain compliance requirements of non-discrimination rules under ERISA and IRS guidelines. For the Plan years ended December 31, 2004 and 2003, the Plan failed certain of these non-discrimination tests due to lower levels of contribution participation by non-highly compensated eligible Plan participants. The Plan has recorded corrective distributions payable of $83, 217 and $102,755 at December 31, 2004 and 2003, respectively, in the statement of net assets available for benefits to reflect the appropriate refund of a portion of the contributions made by highly compensated participants in order to comply with non-discrimination requirements. As a result of the corrective distribution, employer matching contributions attributable to refunds are forfeited to the Plan’s Trust.
7. PARTY-IN-INTEREST TRANSACTIONS
Participants may invest in the common stock of the Company through the Cornell Unitized Stock Fund. The Company is the sponsor of the Plan and, therefore, these transactions qualify as party-in-interest transactions. Loans to participants also qualify as party-in-interest transactions. Certain administrative expenses of the Plan are paid by the Company. These transactions are permitted under provisions of ERISA.
The Plan did have a nonexempt transaction whereby one participant contribution of $3,000 was not timely remitted by the Company to the Plan. The Company and Plan have undertaken corrective actions required by ERISA for this matter.
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SCHEDULE G
CORNELL COMPANIES, INC. 401(k) PROFIT SHARING PLAN
SCHEDULE G, PART III — NONEXEMPT TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
Identity of
party involved | | Relationship
to Plan | | Description of transaction | | Current
value | |
Cornell Companies, Inc. | | Sponsor | | One participant contribution was not timely remitted to the Plan. Deposited with trustee on July 13, 2005. The participant account is credited with approximately $159 in lost earnings from the Plan forfeiture account. | | $ | 3,000 | |
| | | | | | | | |
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SCHEDULE H
CORNELL COMPANIES, INC. 401(k) PROFIT SHARING PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31, 2004
Identity of Issue/Description of Asset | | Number of
Shares/Units | | Cost | | Current
Value | |
| | | | | | | |
AIM Balanced Fund | | 53,905 | | (a) | | $ | 1,363,802 | |
AIM Capital Development Fund | | 14,940 | | (a) | | 273,847 | |
AIM Cash Reserve Fund | | 5,930,564 | | (a) | | 5,930,564 | |
AIM Constellation Fund | | 78,152 | | (a) | | 1,785,004 | |
AIM Funds Basic Value Fund | | 9,690 | | (a) | | 314,135 | |
AIM High Yield Fund | | 14,456 | | (a) | | 65,776 | |
AIM Income Fund | | 17,709 | | (a) | | 116,879 | |
AIM Real Estate Fund | | 21,296 | | (a) | | 553,487 | |
AIM Small Cap Growth Fund | | 15,190 | | (a) | | 417,115 | |
Cash | | 68,863 | | (a) | | 68,863 | |
Cornell Unitized Stock Fund* | | 67,498 | | (a) | | 1,541,671 | |
Goldman Sachs Midcap Value | | 16,984 | | (a) | | 566,914 | |
Goldman Sachs Small Cap Value Fund | | 59,329 | | (a) | | 2,531,575 | |
Janus Advisor International Growth | | 56,202 | | (a) | | 1,624,798 | |
Oppenheimer Main St. G & I – N Shares | | 49,146 | | (a) | | 1,724,033 | |
Scudder Lifecycle Long Range Fund | | 6,478 | | (a) | | 62,968 | |
Scudder Lifecycle Long Midrange Fund | | 11,917 | | (a) | | 119,411 | |
Scudder Advisors Funds III Lifestyle Long Range | | 15,588 | | (a) | | 168,975 | |
Scudder Lifecycle Short Range Fund | | 22,893 | | (a) | | 235,338 | |
Strong Advisor Bond Fund | | 72,742 | | (a) | | 806,704 | |
Participant Loans* | | | | | | | |
(interest rates ranging from 5.00% to 11.50%) | | 1,098,372 | | (a) | | 1,098,372 | |
| | | | | | $ | 21,370,321 | |
* Indicates party-in-interest.
(a) cost omitted for participant-directed investments.
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| | CORNELL COMPANIES, INC. |
| | 401(k) PROFIT SHARING PLAN |
| | |
| | | |
Date: | July 13, 2005 | By: | /s/ Patrick N. Perrin | |
| | Patrick N. Perrin |
| | Sr. V.P., Chief Administrative Officer and
Plan Coordinator
for Cornell Companies, Inc. |
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INDEX TO EXHIBITS
Exhibit
Number | | |
| | |
23.1 | | Consent of Independent Registered Public Accounting Firm – LJ Mosby, P.C. |
23.2 | | Consent of Independent Registered Public Accounting Firm – Pricewaterhouse Coopers LLP |
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