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, 2007
OR
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
|
|
(I.R.S. Employer
|
of incorporation
or organization)
|
|
Identification
No.)
|
|
|
|
1700
West Loop South, Suite 1500, Houston, Texas
|
|
77027
|
(Address of
Principal Executive Offices)
|
|
(Zip Code)
|
Registrants
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,
2007 and 2006 and the changes in net assets available for benefits for the year
ended December 31, 2007 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Plans management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our audits 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 audits provide a
reasonable basis for our opinion.
Our audits were conducted
for the purpose of forming an opinion on the basic financial statements taken
as a whole. The supplemental schedule of assets (held at end of year) as of December
31, 2007 and the supplemental schedule of delinquent participant contributions
for the year ended December 31, 2007, 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 Labors
Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedules are the
responsibility of the Plans 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 11, 2008
2
CORNELL COMPANIES,
INC. 401(k) PROFIT SHARING PLAN
STATEMENTS OF NET
ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2007
AND 2006
|
|
2007
|
|
2006
|
|
ASSETS:
|
|
|
|
|
|
Investments (at
fair value)
|
|
$
|
26,361,511
|
|
$
|
24,578,514
|
|
|
|
|
|
|
|
Receivables:
|
|
|
|
|
|
Employee
contributions
|
|
70,913
|
|
75,840
|
|
Employer
contributions
|
|
29,318
|
|
59,476
|
|
Due from brokers
|
|
25,630
|
|
2,974
|
|
Total
receivables
|
|
125,861
|
|
138,290
|
|
|
|
|
|
|
|
Total assets
|
|
26,487,372
|
|
24,716,804
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
Corrective
distributions payable
|
|
(156,724
|
)
|
(50,000
|
)
|
Due to brokers
|
|
(45,325
|
)
|
(33,653
|
)
|
|
|
|
|
|
|
Total
liabilities
|
|
(202,049
|
)
|
(83,653
|
)
|
|
|
|
|
|
|
NET ASSETS
AVAILABLE FOR PLAN BENEFITS
|
|
$
|
26,285,323
|
|
$
|
24,633,151
|
|
The accompanying
notes are an integral part of these financial statements.
3
CORNELL COMPANIES,
INC. 401(k) PROFIT SHARING PLAN
STATEMENT OF
CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED
DECEMBER 31, 2007
|
|
2007
|
|
|
|
|
|
ADDITIONS:
|
|
|
|
Net appreciation
in fair value of investments
|
|
$
|
3,287
|
|
Dividends
|
|
1,351,307
|
|
Interest
|
|
442,192
|
|
Employee
contributions
|
|
3,752,406
|
|
Employer
contributions
|
|
1,447,159
|
|
Employee
rollover contributions
|
|
220,247
|
|
|
|
|
|
Total additions
|
|
7,216,598
|
|
|
|
|
|
DEDUCTIONS:
|
|
|
|
Benefit payments
and withdrawals
|
|
(5,268,332
|
)
|
Corrective
distributions
|
|
(156,724
|
)
|
Plan expenses
|
|
(139,370
|
)
|
|
|
|
|
Total deductions
|
|
(5,564,426
|
)
|
|
|
|
|
INCREASE IN NET
ASSETS AVAILABLE FOR PLAN BENEFITS
|
|
1,652,172
|
|
|
|
|
|
NET ASSETS
AVAILABLE FOR PLAN BENEFITS, BEGINNING OF YEAR
|
|
24,633,151
|
|
|
|
|
|
NET ASSETS
AVAILABLE FOR PLAN BENEFITS, END OF YEAR
|
|
$
|
26,285,323
|
|
The accompanying
notes are an integral part of these financial statements.
4
CORNELL COMPANIES,
INC. 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL
STATEMENTS
DECEMBER 31, 2007
AND 2006
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 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 Plans
provisions.
Plan Administration and
Trustee
The Company is the Plans
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 Plans asset custodian and DailyAccess Corporation as the Plans 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
participants eligible compensation. Participant rollover contributions
from other qualified plans are allowed under the Plan.
Participant Accounts and
Investment Options
Each participating
employees 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 Companys contributions made on
the participants 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 participants account in the same ratio
as the participants investment in each fund bears to the total of all
participants investments in each fund.
5
Vesting
All participant
contributions are 100 percent vested and nonforfeitable at all times.
Participants become vested in the Companys contributions to the Plan as
follows:
|
|
Hired Before 9/1/00
|
|
Hired After 8/31/00
|
|
Years of Service
|
|
Vested Percent
|
|
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 participants
vested account balance with a minimum loan requirement of $1,000. The
loans are collateralized by the participants vested account balance.
Interest is charged at the current commercial lending rate and is credited to
the participants 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 ½, 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 Companys
contributions to the Plan or to pay the expenses of the Plan. As of December 31,
2007 and 2006, $14,239 and $155,369, respectively, of forfeitures are included
in net assets available for benefits. In 2007, $121,819 of forfeitures
were utilized by the Company to pay the expenses of the Plan and $169,158 of
forfeitures were used to 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.
6
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 Plans 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.
Realized gains (losses) on the sale of mutual funds and common stock and
unrealized appreciation (depreciation) in fair value of mutual funds and 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. Interest
income is recorded as earned and dividends are recorded on the ex-dividend
date.
Financial Accounting
Standards Board Staff Position (FSP) AAG INV-1 and the American Institute of
Certified Public Accountants Statement of Position (SOP) 94-4-1 requires that
plans holding stable value investments as defined in the pronouncement present
those investments at contract value, rather than fair value. The Plan does not
hold any investments that meet this definition of stable value investments.
Expenses
Administrative and other
expenses of the Plan are generally paid from Plan forfeitures. Plan expenses related to participant
initiated withdrawal and loan transactions are paid by the participants from
their account balances. Plan related expenses paid directly by the
Company in 2007 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.
7
4.
INVESTMENTS
Individual investments
that exceed 5 percent of net assets available for benefits at December 31,
2007 and 2006 are as follows:
2007 -
|
|
|
|
AIM Cash Reserve
Fund
|
|
$
|
6,593,128
|
|
AIM
Constellation Fund
|
|
1,554,718
|
|
Goldman Sachs
Small Cap Value Fund
|
|
2,185,522
|
|
Janus Advisor
International Growth
|
|
1,887,537
|
|
Oppenheimer Main
St. Growth and Income N Shares
|
|
1,643,984
|
|
Cornell Unitized
Stock Fund
|
|
1,286,696
|
|
Participant
Loans
|
|
1,129,928
|
|
|
|
|
|
2006
|
|
|
|
AIM Real Estate
Fund
|
|
$
|
1,257,138
|
|
AIM Cash Reserve
Fund
|
|
7,566,087
|
|
AIM
Constellation Fund
|
|
1,502,981
|
|
Goldman Sachs
Small Cap Value Fund
|
|
2,126,012
|
|
Janus Advisor
International Growth
|
|
3,038,539
|
|
Oppenheimer Main
St. Growth and Income N Shares
|
|
1,772,170
|
|
Cornell Unitized
Stock Fund
|
|
1,232,874
|
|
Participant
Loans
|
|
1,307,646
|
|
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, 2007 and 2006.
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, 2007 and
2006, 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
$156,724 and $50,000 at December 31, 2007 and 2006, 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 Plans 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. The Company also provides certain administrative
services to the Plan without compensation. These transactions are permitted
under provisions of ERISA.
Employee contributions of $4,901, loan payments of $396 and
matching employer contributions of $2,095 related to 2007 were not remitted to
the Plans trust on a timely basis. These amounts, with related earnings
thereon, were remitted to the Plan in 2008.
Employee contributions of $19,786, loan payments of $2,410 and matching
employer contributions of $7,608 related to 2006 were not remitted to the Plans
trust on a timely basis. These amounts, with related earnings thereon, were
remitted to the Plan in 2007. These are
prohibited non-exempt party-in-interest transactions. The Plan Administrative
Committee believes it has taken steps to correct these matters and to bring the
Plan into compliance with the related regulations.
8
CORNELL COMPANIES,
INC. 401(k) PROFIT SHARING PLAN
SCHEDULE H, LINE
4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31,
2007
|
|
Number of
|
|
|
|
Current
|
|
Identity of Issue/Description of Asset
|
|
Shares/Units
|
|
Cost
|
|
Value
|
|
|
|
|
|
|
|
|
|
Cash
|
|
38,104
|
|
(a)
|
|
$
|
38,104
|
|
Mutual Funds:
|
|
|
|
|
|
|
|
AIM Basic
Balanced Fund
|
|
69,045
|
|
(a)
|
|
916,231
|
|
AIM Capital
Development Fund
|
|
31,920
|
|
(a)
|
|
585,732
|
|
AIM Cash Reserve
Fund
|
|
8,837,961
|
|
(a)
|
|
8,837,961
|
|
AIM
Constellation Fund
|
|
51,913
|
|
(a)
|
|
1,524,673
|
|
AIM Basic Value
Fund
|
|
15,094
|
|
(a)
|
|
475,455
|
|
AIM High Yield
Fund
|
|
25,674
|
|
(a)
|
|
109,116
|
|
AIM Income Fund
|
|
19,954
|
|
(a)
|
|
119,523
|
|
AIM Real Estate
Fund
|
|
35,162
|
|
(a)
|
|
802,407
|
|
AIM Small Cap
Growth Fund
|
|
20,377
|
|
(a)
|
|
590,923
|
|
|
|
|
|
|
|
|
|
Goldman Sachs
Midcap Value
|
|
28,727
|
|
(a)
|
|
1,015,511
|
|
Goldman Sachs
Small Cap Value Fund
|
|
50,252
|
|
(a)
|
|
1,719,128
|
|
Delaware
Foundation Conservative Allocation Fund
|
|
17,396
|
|
(a)
|
|
161,959
|
|
Delaware
Foundation Aggressive Allocation Fund
|
|
47,644
|
|
(a)
|
|
501,687
|
|
Delaware
Foundation Moderate Allocation Fund
|
|
33,022
|
|
(a)
|
|
348,056
|
|
Janus Advisor
International Growth
|
|
60,614
|
|
(a)
|
|
3,904,742
|
|
Oppenheimer Main
St. G & I N Shares
|
|
48,617
|
|
(a)
|
|
1,757,035
|
|
Wells Fargo
Total Return Bond Fund
|
|
38,224
|
|
(a)
|
|
476,267
|
|
Company Stock:
|
|
|
|
|
|
|
|
Cornell Unitized
Stock Fund*
|
|
38,288
|
|
(a)
|
|
1,302,383
|
|
|
|
|
|
|
|
|
|
Participant
Loans* (interest rates ranging from 5.00% to 11.50%)
|
|
|
|
(a)
|
|
1,174,618
|
|
|
|
|
|
|
|
$
|
26,361,511
|
|
*
Indicates
party-in-interest.
(a)
cost
omitted for participant-directed investments.
9
CORNELL COMPANIES, Inc.
401(K) PROFIT SHARING PLAN
SCHEDULE H, LINE
4a SCHEDULE OF DELINQUENT PARTICIPANT CONTRIBUTIONS
FOR THE YEAR ENDED
DECEMBER 31, 2007
Participant contributions
|
|
Total that constitute nonexempt prohibited transactions
|
|
Total fully corrected
|
|
Or loan payments
|
|
Amounts not
|
|
Corrected
|
|
Corrections
|
|
under VFCP
|
|
Transferred late to the Plan
|
|
corrected
|
|
outside VFCP
|
|
pending n VFCP
|
|
and PTE 2002-51
|
|
|
|
|
|
|
|
|
|
|
|
2006 amounts
remitted to the Plan in 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,196
|
|
|
|
|
|
$
|
22,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 amounts
remitted to the Plan in 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,297
|
|
|
|
|
|
$
|
5,297
|
|
|
|
|
|
10
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 14, 2008
|
By:
|
/s/ PATRICK N. PERRIN
|
|
|
|
Patrick N. Perrin
|
|
|
|
Sr. V.P., Chief
Administrative Officer and
Plan Coordinator for Cornell Companies, Inc.
|
11
INDEX
TO EXHIBITS
Exhibit
Number
|
|
|
|
|
|
23.1
|
|
Consent of Independent
Registered Public Accounting Firm LJ Mosby, P.C.
|
12
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