UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] 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 CORRECTIONS, INC. 401(K) PROFIT SHARING PLAN
CORNELL COMPANIES, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0433642
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(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1700 WEST LOOP SOUTH, SUITE 1500, HOUSTON, TEXAS 77027
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 623-0790
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
the Cornell Corrections, Inc. 401(k) Profit Sharing Plan:
We have audited the accompanying statements of net assets available for benefits
of the Cornell Corrections, Inc. 401(k) Profit Sharing Plan (the Plan) as of
December 31, 1999 and 1998, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements and
supplemental schedule referred to below are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements and supplemental schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the 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. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1999 and 1998, and the changes in net assets available for benefits
for the years then ended, in conformity with accounting principles generally
accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes as of December 31, 1999, is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
June 14, 2000
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CORNELL CORRECTIONS, INC.
401(K) PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999 AND 1998
1999 1998
------------ ------------
ASSETS:
Investments (at fair value):
Mutual Funds .............................. $ 9,077,127 $ 4,693,401
Cornell Corrections, Inc. Common Stock .... 568,076 976,923
Participant Loans ......................... 289,868 272,196
------------ ------------
Total Investments ....................... 9,935,071 5,942,520
Cash, Non-Interest Bearing ................... 724 --
Receivables:
Employer Contributions .................... 86,271 62,080
Employee Contributions .................... 162,535 153,224
Accrued Income ............................ 3,110 19,843
Other ..................................... 5,310 --
------------ ------------
Total Receivables ....................... 257,226 235,147
LIABILITIES:
Excess Contribution Payable ............... (86,184) --
Other ..................................... (30,104) (33,182)
------------ ------------
Total Liabilities ....................... (116,288) (33,182)
NET ASSETS AVAILABLE FOR BENEFITS ............ $ 10,076,733 $ 6,144,485
============ ============
The accompanying notes are an integral part of these financial statements.
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CORNELL CORRECTIONS, INC.
401(K) PROFIT SHARING PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
------------ ------------
ADDITIONS:
Net Investment Income from
Pooled Separate Accounts/Mutual Funds ....... $ 1,419,825 $ 405,318
Net (Depreciation)/Appreciation of Common Stock (605,035) 11,442
Interest ...................................... 51,653 22,171
Dividends ..................................... 108,222 142,094
Employee Contributions ........................ 1,820,626 1,541,143
Employer Contributions ........................ 765,661 769,496
Employee Rollover Contributions ............... 1,468,542 117,166
------------ ------------
Total Additions ............................. 5,029,494 3,008,830
DEDUCTIONS:
Employee Benefit Payments and Withdrawals ..... (884,506) (686,046)
Excess Contributions .......................... (111,777) --
Plan Expenses ................................. (100,963) (67,540)
------------ ------------
Total Deductions ............................ (1,097,246) (753,586)
INCREASE IN NET ASSETS
AVAILABLE FOR BENEFITS ........................ 3,932,248 2,255,244
NET ASSETS AVAILABLE FOR
BENEFITS, BEGINNING OF YEAR ................... 6,144,485 3,889,241
------------ ------------
NET ASSETS AVAILABLE FOR
BENEFITS, END OF YEAR ......................... $ 10,076,733 $ 6,144,485
============ ============
The accompanying notes are an integral part of these financial statements.
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CORNELL CORRECTIONS, INC.
401(K) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. DESCRIPTION OF THE PLAN
GENERAL
The Cornell Corrections, Inc. 401(k) Profit Sharing Plan (the Plan) was
established on January 1, 1993, and is a trusteed defined contribution plan in
which generally all employees of Cornell Companies, Inc. (formerly Cornell
Corrections, 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. The Board of Directors of the Company
appoints an individual to be responsible for the administration of the Plan. The
Company has appointed Comerica Bank as the Plan's asset custodian and
recordkeeper to hold and control the assets of the Plan in accordance with the
terms of the Plan. The Company is the trustee of the Plan.
ELIGIBILITY AND CONTRIBUTIONS
All employees except leased employees who have completed one year of service are
eligible to participate in the Plan. Following the completion of one year of
service, participants can enroll in the Plan quarterly.
Employees may elect to contribute from 1 percent to 15 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, not to exceed
6 percent of the participants' compensation.
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 retirement plan committee.
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 of their individual
accounts among seven mutual funds and Cornell Corrections, Inc. Common Stock.
Investment income or loss is allocated monthly 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 PERCENT VESTED
---------------- --------------
1 0%
2 20%
3 40%
4 60%
5 100%
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, 1999 and 1998, $13,048 and $8,539 of forfeitures are included in
net assets available for benefits, respectively. During the year ended December
31, 1999, $72,458 of forfeitures was utilized by the Company to pay the expenses
of the Plan.
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.
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 secured 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, retirement or death in accordance with the aforementioned
vesting schedule.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared on the accrual basis of
accounting. 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.
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VALUATION OF INVESTMENTS
Investments in mutual funds 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. The net
appreciation and depreciation of Plan assets is based on the value of the assets
at the beginning of the Plan year or at the time of purchase during the year.
ADOPTION OF SOP 99-3
Effective January 1, 1999, the Plan adopted Statement of Position (SOP) 99-3,
"Accounting for and Reporting of Certain Defined Contribution Plan Investments
and Other Disclosure Matters", which eliminates the requirement for a defined
contribution plan to disclose participant-directed investment programs. As such,
the 1998 financial statements have been reclassified to eliminate the
participant-directed fund investment program disclosures.
EXPENSES
Administrative and other expenses of the Plan are to be paid by the Company or
with forfeitures of the Plan.
3. FEDERAL INCOME TAXES
The Plan originally obtained a favorable determination letter from the IRS on
March 8, 1994. The Plan operated under the Aetna Comprehensive Nonstandardized
Safe Harbor 401(k) Profit Sharing Plan prototype document until May 31, 1998.
Effective June 1, 1998, the Plan began operating under the Comerica Prototype
Cash or Deferred Profit-Sharing Plan and Trust/Custodial Account (Prototype
Plan) document. The Prototype Plan received a favorable determination letter on
January 27, 1993. The Company plans to rely on the Prototype Plan's
determination letter. 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, 1999 and 1998.
4. 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.
5. INVESTMENTS
Individual investments which exceed 5 percent of net assets available for
benefits at December 31, 1999 and 1998 are as follows:
1999 1998
---------- ----------
Franklin Balance Sheet Investment Fund ............... $ 868,879 $ 519,947
Janus Worldwide Fund ................................. 1,566,618 571,111
Putnam Investors Fund (Class A) ...................... 2,745,297 1,392,057
Munder Index 500 Fund (K-Shares) ..................... 1,664,584 851,627
AIM Balanced Fund (Class A) .......................... 1,170,739 578,109
Munder U.S. Treasury Money Market Fund (K-Shares) .... 748,941 606,714
Cornell Corrections, Inc. Common Stock ............... 568,076 976,923
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SCHEDULE I
CORNELL CORRECTIONS, INC.
401(K) PROFIT SHARING PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1999
NUMBER OF CURRENT
IDENTITY OF ISSUE/DESCRIPTION OF ASSET SHARES/UNITS COST VALUE
-------------------------------------- ------------ ---- -------------
Franklin Balance Sheet Investment Fund..................................... 28,516 (a) $ 868,879
Janus Worldwide Fund....................................................... 20,497 (a) 1,566,618
Putnam Investors Fund (Class A)............................................ 143,358 (a) 2,745,297
Munder Index 500 Fund (K-shares)........................................... 53,766 (a) 1,664,584
AIM Balanced Fund (Class A)................................................ 35,813 (a) 1,170,739
Munder U.S. Government Income Fund (K-shares).............................. 32,139 (a) 312,069
Munder U.S. Treasury Money Market Fund (K-shares).......................... 748,941 (a) 748,941
Cornell Corrections, Inc. Common Stock *................................... 67,830 (a) 568,076
Participant Loans (interest rates ranging from 7.50% to 9.50%)............. 289,868
-------------
$ 9,935,071
=============
* Indicates party in interest.
(a) cost omitted for participant-directed investments.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
CORNELL COMPANIES, INC.
Date: June 26, 2000 By: /S/ PAT PERRIN
Pat Perrin
Chief Administrative Officer
and Plan Coordinator
for Cornell Companies, Inc.
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INDEX TO EXHIBIT
EXHIBIT
NUMBER
23.1 Consent of Independent Public Accountants