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<PERIOD>20040805
<ITEMS>12
<ITEMS>7
<FILING-DATE>20040812
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>CORNELL COMPANIES INC
<CIK>0001016152
<ASSIGNED-SIC>8744
<IRS-NUMBER>760433642
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
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<FORM-TYPE>8-K
<ACT>34
<FILE-NUMBER>001-14472
<FILM-NUMBER>04971233
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1700 WEST LOOP SOUTH
<STREET2>STE 1500
<CITY>HOUSTON
<STATE>TX
<ZIP>77027
<PHONE>7136230790
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1700 WEST LOOP SOUTH
<STREET2>STE 1500
<CITY>HOUSTON
<STATE>TX
<ZIP>77027
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>CORNELL CORRECTIONS INC
<DATE-CHANGED>19960604
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<div style="border:none;border-top:double windowtext 9.0pt;padding:0in 0in 0in 0in;">

<p align="center" style="border:none;margin:0in 0in .0001pt;padding:0in;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>

</div>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">UNITED STATES</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">SECURITIES AND
EXCHANGE COMMISSION</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Washington, D.C.
20549</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">FORM 8-K</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="3" face="Times New Roman" style="font-size:12.0pt;font-weight:bold;">CURRENT REPORT</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="3" face="Times New Roman" style="font-size:12.0pt;font-weight:bold;">Pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date of Report (Date of earliest event
reported):<b><font style="font-weight:bold;">&nbsp; August 12, 2004 (August 5,
2004)</font></b></font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="5" face="Times New Roman" style="font-size:18.0pt;font-weight:bold;">CORNELL COMPANIES,
INC.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Exact Name of Registrant as Specified
in its Charter</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<div align="center">

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="34%" valign="top" style="padding:0in 0in 0in 0in;width:34.88%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Delaware</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.66%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="24%" valign="top" style="padding:0in 0in 0in 0in;width:24.98%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">1-14472</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.66%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="34%" valign="top" style="padding:0in 0in 0in 0in;width:34.82%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">76-0433642</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="34%" valign="top" style="padding:0in 0in 0in 0in;width:34.88%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">State of Incorporation or <br>
  Organization</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.66%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="24%" valign="top" style="padding:0in 0in 0in 0in;width:24.98%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Commission File Number</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.66%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="34%" valign="top" style="padding:0in 0in 0in 0in;width:34.82%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">I.R.S. Employer <br>
  Identification No.</font></p>
  </td>
 </tr>
</table>

</div>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&nbsp;</font></p>

<div align="center">

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.38%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">1700 West Loop
  South, Suite 1500 <br>
  Houston, Texas</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.56%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="43%" valign="bottom" style="padding:0in 0in 0in 0in;width:43.06%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">77027</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="54%" valign="top" style="padding:0in 0in 0in 0in;width:54.38%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Address of Principal Executive
  Offices</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.56%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="43%" valign="top" style="padding:0in 0in 0in 0in;width:43.06%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(Zip Code)</font></p>
  </td>
 </tr>
</table>

</div>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="3" face="Times New Roman" style="font-size:12.0pt;">&nbsp;</font></p>

<div align="center">

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="100%" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">(713) 623-0790</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="100%" valign="top" style="padding:0in 0in 0in 0in;width:100.0%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Registrant&#146;s telephone number,<br>
  including area code</font></p>
  </td>
 </tr>
</table>

</div>

<div style="border:none;border-bottom:double windowtext 9.0pt;padding:0in 0in 0in 0in;">

<p align="center" style="border:none;margin:0in 0in .0001pt;padding:0in;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

</div>

<div align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">

<hr size="2" width="100%" align="center">

</font></b></div>


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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">&nbsp;</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">INFORMATION TO BE
INCLUDED IN REPORT</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 58.3pt;text-indent:-58.3pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Item 7.</font><font size="1" face="Times New Roman" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" face="Times New Roman" style="font-size:10.0pt;">Financial
Statements and Exhibits</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 59.05pt;text-indent:-51.85pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)</font><font size="1" face="Times New Roman" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" face="Times New Roman" style="font-size:10.0pt;">Exhibits</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt .8in;text-indent:-.7in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">99.1</font><font size="1" face="Times New Roman" style="font-size:8.5pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font size="2" face="Times New Roman" style="font-size:10.0pt;">August
5, 2004 Transcript of Second Quarter Earnings Release Conference Call and
Reconciliation of Non-GAAP Financial Measures to GAAP.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-family:Times New Roman;margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Item 12.</font></b><font size="2" style="font-size:10.0pt;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size="2" style="font-size:10.0pt;">Results of Operations
and Financial Condition.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">On&nbsp;August 5, 2004,&nbsp; Cornell
Companies, Inc., a Delaware corporation, held a conference call announcing its
financial results for the&nbsp;second&nbsp;quarter ended&nbsp;June 30, 2004. A
transcript of the conference call is furnished as Exhibit 99.1 to this report
and is incorporated herein by reference. Certain non-GAAP measures also are set
forth in Exhibit 99.1. A non-GAAP financial measure is a numerical measure of a
company&#146;s performance that either excludes or includes amounts that are not
normally excluded or included in the most directly comparable measure
calculated and presented in accordance with GAAP. The Registrant believes that
these non-GAAP measures assist both the Company and its investors in
understanding operating trends. Management uses these measures internally to
evaluate its operating performance and the measures are used for planning and
forecasting of future periods. However, non-GAAP measures are not in accordance
with, nor are they a substitute for, GAAP measures. The disclosure in Exhibit
99.1 allows investors to reconcile the non-GAAP measures to GAAP. The information
in this Current Report on Form 8-K, including the exhibit, shall not be deemed&nbsp; &#147;filed&#148; for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended&nbsp; (the &#147;Exchange Act&#148;), or incorporated by
reference in any filing under the Securities Act of 1933, as amended, or the
Exchange Act, except as shall be expressly set forth by specific reference in
such a filing.</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>

<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></b></div>


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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">SIGNATURE</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly authorized.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="44%" valign="top" style="padding:0in .7pt 0in .7pt;width:44.62%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dated:&nbsp;August 12, 2004</font></p>
  </td>
  <td width="55%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:55.38%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="44%" valign="top" style="padding:0in .7pt 0in .7pt;width:44.62%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="55%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:55.38%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="44%" valign="top" style="padding:0in .7pt 0in .7pt;width:44.62%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="55%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:55.38%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CORNELL COMPANIES, INC.</font></p>
  </td>
 </tr>
 <tr>
  <td width="44%" valign="top" style="padding:0in .7pt 0in .7pt;width:44.62%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.5%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="48%" valign="top" style="padding:0in .7pt 0in .7pt;width:48.88%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="44%" valign="top" style="padding:0in .7pt 0in .7pt;width:44.62%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.5%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="48%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:48.88%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ John Nieser</font></p>
  </td>
 </tr>
 <tr>
  <td width="44%" valign="top" style="padding:0in .7pt 0in .7pt;width:44.62%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.5%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name:</font></p>
  </td>
  <td width="48%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:48.88%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">John Nieser</font></p>
  </td>
 </tr>
 <tr>
  <td width="44%" valign="top" style="padding:0in .7pt 0in .7pt;width:44.62%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="6%" valign="top" style="padding:0in .7pt 0in .7pt;width:6.5%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
  </td>
  <td width="48%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:48.88%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Treasurer and Acting Chief Financial
  Officer</font></p>
  </td>
 </tr>
</table>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>

<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></b></div>


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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit Index</font></b></p>

<p style="margin-left:0in;margin-right:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Introductory Note: </font></b><font size="2" face="Times New Roman" style="font-size:10.0pt;">The following exhibit is furnished
pursuant to Item 12 of Form 8-K and is not to be considered &#147;filed&#148; under the
Exchange Act and shall not be incorporated by reference into any of the
Company&#146;s previous or future filings under the Securities Act or the Exchange
Act.</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="11%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:11.52%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Exhibit<br>
  Number</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.08%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="86%" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:86.4%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Description</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="11%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:11.52%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="86%" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:86.4%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="11%" valign="top" style="padding:0in .7pt 0in .7pt;width:11.52%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">99.1</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in .7pt 0in .7pt;width:2.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="86%" valign="top" style="padding:0in .7pt 0in .7pt;width:86.4%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">August 5, 2004 Transcript of Second
  Quarter Earnings Release Conference Call and Reconciliation of Non-GAAP
  Financial Measures to GAAP.</font></p>
  </td>
 </tr>
</table>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>

<div style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">

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</font></b></div>

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<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit 99.1</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Introductory
Note:</font></b>&#160; The
Company in not responsible for any transcript errors herein.</p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt -.4pt;text-align:right;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;">FINAL TRANSCRIPT</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Conference
Call Transcript</font></b></p>

<p style="color:#003399;font-weight:bold;margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">&nbsp;</font></b></p>

<p style="color:#003399;font-weight:bold;margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">CRN - Q2 2004 Cornell
Companies, Inc. Earnings Conference Call</font></b></p>

<p style="color:#003399;font-weight:bold;margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">&nbsp;</font></b></p>

<p style="color:#003399;font-weight:bold;margin:0in 0in .0001pt;page-break-after:auto;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">Event Date/Time: Aug. 05. 2004 / 11:00AM ET</font></b></p>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Event
Duration: N/A<br><br></font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

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</font></div>


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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="color:#6B9915;font-weight:bold;letter-spacing:2.0pt;margin:0in 0in .0001pt;text-transform:uppercase;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;letter-spacing:0pt;text-transform:none;">CORPORATE PARTICIPANTS</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Lisa Fortuna</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Financial Relations Board - Moderator</font></i></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Cornell Companies - Chairman and CEO</font></i></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;John Nieser</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Cornell Companies - Treasurer, Acting CFO</font></i></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Cornell Companies - President and COO</font></i></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman">&nbsp;</font></i></p>

<p style="color:#6B9915;font-weight:bold;letter-spacing:2.0pt;margin:0in 0in .0001pt;text-transform:uppercase;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;letter-spacing:0pt;text-transform:none;">CONFERENCE CALL
PARTICIPANTS</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;David Tomblin</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;J.P. Morgan - Analyst</font></i></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tony Randall</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">Analyst</font></i></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Phil Schipper</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Hartford Management - Analyst</font></i></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Nelson Obus</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Wynnefield - Analyst</font></i></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Rick D&#146;Auteuil</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Columbia Management - Analyst</font></i></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Sheryl Skolnick</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Fulcrum Global Partners - Analyst</font></i></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Todd Van Fleet</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;First Analysis - Analyst</font></i></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Zachary George</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Pirate Capital - Analyst</font></i></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p align="left" style="font-weight:bold;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Ross Taylor</font></b></p>

<p align="left" style="font-style:italic;line-height:normal;margin:0in 0in .0001pt;text-align:left;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Caxton and Associates - Analyst</font></i></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="color:#6B9915;font-weight:bold;letter-spacing:2.0pt;margin:0in 0in .0001pt;text-transform:uppercase;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;letter-spacing:0pt;text-transform:none;">PRESENTATION</font></b></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operator</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Good morning, ladies and gentlemen, and
welcome to the Cornell Companies second quarter 2004 results conference call.
At this time, all participants are in a listen only mode. Following today&#146;s
presentation, instructions will be given for the question-and-answer session.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">(OPERATOR
INSTRUCTIONS)</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">As a
reminder, this conference is being recorded today Thursday August 5th, 2004. I
would now like to turn the conference over to Lisa Fortuna with the Financial
Relations Board. Please go ahead, Ma&#146;am.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Lisa Fortuna <i><font style="font-style:italic;">&#160;- Financial Relations Board - Moderator</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Good morning. Thank you all for joining us to
discuss Cornell Companies second quarter 2004 results. By now, everyone should
have a copy of the press release that was sent out earlier this morning. If
anyone needs a copy it is available on the Cornell website at
www.CornellCompanies.com or you can call us at 312-640-6688 and we can resend
the information.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Joining
us today from management, we have Harry Phillips, Chairman and Chief Executive
Officer; Tom Jenkins, president and Chief Operating Officer; John Nieser,
acting chief financial officer and Lou Collazo vice president and controller.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Before
we get started we&#146;d like to inform you that certain statements made during this
conference call that are not historical may be deemed forward looking
statements within the meanings of the Private Securities Litigation Reform Act
of 1995.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">These
statements are discussed in the press release issued today. Risk factors
associated with these statements can be found in the latest SEC filing.
Additionally, we want to let you know that the information and statements made
during the call are made as of the date of this call. Listeners (indiscernible)
replay should understand that the passage of time by itself will diminish the
quality of these statements. The contents of the call are the property of the
Company and any replay or transmission of the call may be done with the consent
of Cornell Companies Incorporated.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">With
that aside, I&#146;d like to turn the call over to Harry Phillips for his opening
remarks. Please go ahead Harry.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell
Companies - Chairman and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Thank you Lisa. Good morning, this is Harry
Phillips. I am Chairman and CEO of Cornell and thanks for joining us today for
our second quarter &#145;04 earnings conference call. As Lisa mentioned joining me
today are Tom Jenkins our President and John Nieser, our acting chief financial
officer and Lou Collazo our controller.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">First
I&#146;d like to mention that earlier this week we announced that John Hendrix had
resigned from his position as CFO and I did want to take this opportunity to
thank him for his contributions over the years. We&#146;re pleased that we will have
the continued benefit of his experience during the consulting period. We will
be conducting a nationwide search for John&#146;s replacement. In the interim John
Nieser, our Treasurer, will perform the CFO&#146;s functions.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">John&#146;s
an experienced financial professional. We&#146;re fortunate to be able to rely on
him.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Turning
to the quarter must of you have already seen our earnings release as well as
last week&#146;s release announcing preliminary results that would not meet our
expectations. We reported a GAAP loss of 8 cents a share versus our expectation
of a loss of 5 cents per share after giving consideration to charges related to
the early extinguishment of debt.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">This
compares with earnings last year of 17 cents a share. On a pro forma basis
earnings were 13 cents a share, compared with our expectation of 19 cents. Pro
forma results exclude the charges related to the early extinguishment of debt,
startup expenses net of revenues for new facilities and losses associated with
New Morgan Academy.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">As
you are aware, we are not happy with these results. This performance was
especially disappointing because we were on track the first two months of the
quarter but June was negatively impacted by lower than expected revenues, and
higher-than-expected expenses across a number of facilities. Tom and John will
give you some more details on these items as well as what we have done and are
doing to ensure that they are not repeated.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Even
though the financial results for the quarter were disappointing we do not want
to lose sight of the fact that we continue to make progress in our pipeline of
projects and development. Even though in some cases these projects are ramping
up more slowly than we would like, we still expect they represent a run rate of
over 100 million. Traditionally they were accomplishments during this quarter
and since the quarter end that will contribute to our long-term growth
strategy.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">For
example in July we activated the first tower of the regional Correctional
Center in New Mexico. Just yesterday, we opened Southern Peaks Treatment
Center. We have assumed an agreement to operate a 976 bed Youth facility in
Walnut Grove, Mississippi. We signed a five-year agreement to provide
alternative education services to third and fourth-grade students in the
Philadelphia school district. Also we won a contract to operate an adult community
corrections center in the Las Vegas area.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">All
these will add to revenues and contribute positively to earnings and,
importantly, the Walnut Grove and Las Vegas contracts give us a foot in the
door in Mississippi and Nevada, respectively, which will improve our position
to win additional business in those states.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">We
also secured the longer-term financing that will provide the funds and
flexibility to bring our pipeline of projects to fruition. As well as give us
the dry powder to capitalize on future attractive opportunities by issuing 112
million principal amount of 8 year notes and entering into a $60 million
revolving credit facility that can be expanded to $100 million. While we do
acknowledge these financial results and some short-term dilution we believe
that over the long-term the shareholder value that will be created is truly
meaningful and well worth the trade-off.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Taking
all the above factors into account we have updated out outlook for the
remainder of the year. I did want to point out that because the earnings impact
and startup projects are dependent on a number of issues that make it difficult
to predict exactly when they will contribute and because we have several
startups right now, it is appropriate to give you an EPS range rather than a single
number.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Looking
forward, we expect GAAP EPS for the third quarter to range between a loss of 8
and 4 cents per share. In pro forma EPS to range between earnings of 8 and 12
cents per share. For the year we expect GAAP EPS to run between 3 and 7 cents
earnings per share in pro forma EPS from 53 to 57 cents.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">As I
said earlier we still expect to reach about 300 million in revenues which
equates to about a 10 percent growth over last year.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Now
I&#146;ll ask John Nieser to give you more details on the financials and then Tom
Jenkins will discuss our facilities and we will come back to John after that
and give you our updated outlook for the third quarter in &#145;04. John.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;John Nieser <i><font style="font-style:italic;">&#160;- Cornell Companies - Treasurer, Acting CFO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Thank you Harry. As Harry mentioned, we
reported second quarter pro forma earnings per share of 13 cents priority
charges related to the early extinguishment of debt, preopening and startup
expenses, net of startup revenues and costs associated with New Morgan Academy.
We are reporting revenues at 70 million at second quarter, which is a 3.6
percent net increase from revenues at 67.6 million, the same quarter of the
prior year. This increase is primarily due to increased contribution to the Big
Spring</font></b></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">correctional
facility, Texas Adolescent Center, and certain of the Pennsylvania based
facilities.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Overall
the occupancy levels at our residential facilities were strong for the second
quarter at 100.9 percent. However certain facilities and programs experienced
lower than anticipated revenues in June which Tom will discuss in greater
detail.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">I
will point out more of the significant revenue changes by division. In the
juvenile services division revenues increased approximately 1.7 million to 31.2
million. Revenues for 2004 include revenues of approximately 1.5 million, in
the Texas Adolescent Center, we began operating in October 2003 and startup
revenues of approximately 800,000 for the Joe (indiscernible) Residential
Treatment Center which began operating in June 2003.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Increased
occupancy at Cornell Abraxas 1 resulted in revenues &#150; increased revenues for
approximately $.5 million. Additionally we terminated our management contract
for the (indiscernible) Youth Development program effective September 30, 2003,
which reduced revenues by approximately $1 million in the second quarter of
2004 as compared to 2003.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Average
contract occupancy for the juvenile services division was 95.6 percent for the
second quarter of 2004 as compared to 91.1 percent for the same quarter of
2003. The average contract occupancy for 2003 and 2004 includes the startup
operations of the Joe (indiscernible) Residential Treatment Center and the
Plankinton Regional Detention Center in 2004.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Excluding
startup operations average contract occupancy for the second quarter of 2004
was 98 percent.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Secure
institutional service division revenues increased by 1.1 million to 26.7
million in the period. The increase in revenues at Big Spring Correctional
Facility of approximately 1.4 million was due to a 32-bed expansion included in
April 2003 and an increase in per diem rates in mid-March 2004.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Revenues
were reduced by approximately $300,000 at the Deeray James Facility due to a
reduction per diem in the second half of 2003. The average contract occupancy
for the secure institutional services division was 101.6 percent for first
quarter 2004 as compared to 100.3 percent the same quarter of 2003.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">In
the adult community based corrections and treatment service division, revenues decreased
by $400,000 to approximately 12.1 million. This is principally due to a
decrease in revenues at the Dallas County Judicial Treatment Center due to
decreased occupancy and the termination of the Santa Fe electronic marketing
program in the first quarter of 2004. Average contract occupancy for the adult
community-based services division was 103.3 percent for the first quarter of
2004 as compared to 109.7 percent for the same quarter of 2003.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Turning
to operating margins. The 2004 second quarter operating margin net of
preopening and startup expenses and revenues was 19.3 percent as compared to
22.9 percent for the same quarter of 2003. However if you exclude preopening
and startup expenses and revenue and the cost associated with the New Morgan Academy
our pro forma operating margin was 22.3 percent in the first quarter of 2004
compared to 24.4 percent in the same quarter of 2003.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Preopening
and startup costs were approximately 2.4 million related to the preopening and
startup activities for the Jos-Arz residential treatment center of Plankinton
Retail Detention Center, the Regional Correction Center in New Mexico and the
Southern Peaks regional treatment center. Revenues attributable to startup
operations were approximately $838,000 for the quarter.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">The
operating margins were negatively impacted by the lower than anticipated
revenue as well as by the higher than expected expenses in June. The expenses
included areas such as personal cost which Tom will address as well as
provisions on Accounts Receivable at certain facilities and programs. We
continually evaluate our accounts receivable each month and record such
provisions in the normal course of business in accordance with internal
policies which consider many factors such as aging, prior (indiscernible)
collectibility issues.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Accounts
Receivable are dilated each period and position adjusted as deemed necessary.
Additional provision which arose in June was primarily driven by our general
standard Medicaid provisions applied as (indiscernible) age. Difference between
the estimated and actual collections to date on these specific receivables
necessitated the additional provision. This period&#146;s principal provision is
mainly attributable to 1 facility which Tom will address in greater detail.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">As in
previous quarters our operating margin continues to be impacted negatively as a
result of the closure of the New Morgan Academy principally its continuing
operation cost facility depreciation and maintenance. For the six months ended
June 30, 2004, revenues increased 4 percent to 139.3 million from 133.6 million
for the six-months ended June 30 2003. Income from operations was 10.6 million
for this year&#146;s six-month period compared with 16 million in the prior year
period.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Net
loss of $393,000 or 3 cents per diluted share compared with net income of 4.1
million or 32 cents per diluted share in the prior year period. The 2004 period
included the $2.4 million charge from the early extinguishment of debt.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Pro
forma revenues in the six-month ended June 30, 2004 were 137.9 million compared
with 133.6 million in the prior year&#146;s period and pro forma income from
operations was 14 million compared with 17.6 million in the 2003 period.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

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</font></div>


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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Pro
forma net income was 3.5 million or 27 cents per diluted share compared with
5.5 million or 42 cents per diluted share in the six-month ended June 30, 2003.
The factors that impacted second quarter 2004 results also impacted the
six-month results.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">EBITDA
as adjusted for net startup costs was approximately 9.4 million for the second
quarter of 2004 compared to 11 million for the second quarter of 2003. The
decrease in 2004 was principally due to the impact of lower than anticipated
revenues and higher than anticipated expenses as well as certain professional
fees incurred during June 2004.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">For
the six-month ended June 30, 2004 EBITDA as adjusted for net startup costs was
approximately 19.5 million as compared to 21.4 million for the six-month ended
June 30, 2003.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">General
and administrative expenses were approximately 5.6 million for the second
quarter of 2004 compared to 4.7 million for the same quarter of 2003. The
increase is due to the increased professional expenses approximately $1 million
related to Southern Peaks regional treatment center (indiscernible) litigation
Sarbanes Oxley compliance fees and other advisory fees. Additionally certain
personnel costs increased to approximately $164,000.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">These
increases were offset in part by a decrease in rent expense of approximately
$300,000.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Interest
expense net of interest income was approximately 4.2 million in the first
quarter of 2004 compared to 4.5 million in the same quarter of 2003. Decrease
as a result of capitalized interest of approximately $524,000 in 2004 related
to the Southern Peaks Regional Treatment Center in Moshannon Valley.
(indiscernible) offset in part by increasing interest of approximately $180,000
pertaining to the Senior Notes issued in June 2004.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">We
capitalized approximately $198,000 for Moshannon Valley in 2003.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Cash
provided by operating activities was approximately 13.6 million for the quarter
ended June 30, 2004. The increase is principally due to an increase &#150; a
decrease in Accounts Receivable and certain other working capital changes.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Cash
used in the (indiscernible) activity was approximately 16.8 million in the
second quarter of 2004 principally due to the investment in projects such as
Southern Peaks, the regional correctional Center and the facility in Baker,
California. Maintenance CapEx totaled approximately $571,000. Cash flow from
financing activities were approximately 40 million for the quarter ended June
30, 2004 primarily due to the issuance of the Senior notes and the payment of
the previous revolver and (indiscernible) lease obligations.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">As
Harry mentioned previously on June 24th we issued a discount of approximately
$1.5 million 112 million (indiscernible) Senior Notes and the interest rate of
10.75 percent. The notes will mature on July 1, 2012, and will pay interest
semiannually. In conjunction with this transaction we also entered into a new
four-year $60 million revolving credit facility which had the capability of
being expanded up to 100 million. Proceeds from these transactions were used to
pay off the existing revolving credit facility and synthetic lease obligations
totaling approximately $66 million. In conjunction with the early retirement of
these obligations we recognize the (indiscernible) charge of approximately $2.4
million in the second quarter. In conjunction with the Senior Notes issuance we
entered into an eight-year interest rate swap transaction takes our exposure to
change from the fair value on volume $84 million of our new Senior Notes. The
purpose of this transaction was to convert future (indiscernible) fees on these
notes to a lower variable rate in an effort to realize savings on our future
interest payment.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Under
the agreement we will pay on a semiannual basis (indiscernible) on a six-month
LIBOR, focused spread and we will receive fixed interest payment of &#150; based on
10.75 percent.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">With
that I&#146;d like to turn the call over to Tom Jenkins.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Thanks. Harry used the terms not happy and
disappointed to describe our feelings to date and I&#146;m certainly in agreement with
those sentiments. Our internal reporting had its rate on plan at the end of
May. At that point we experience an unprecedented combination of events that
made June a terrible month. I am going to spend a few moments describing those
events in greater detail and then talk a bit about the actions we have underway
to ensure that they do not recur.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">I&#146;m
not however going to stay mired in our disappointment. Last year we implemented
a business plan and a growth plan to produce increased shareholder over the long
term. We are firmly committed to that plan and even though our June results
represent a setback, we are undeterred in our efforts to achieve our plan to
improve our results.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Let
me discuss the quarter. As previously reported our Q2 results were impacted by
reduced revenues in increased expenses during the month of June. On the revenue
side, a number of our programs experienced unexpectedly and unusually low
populations. I want to be clear about the terms unexpectedly and unusually. It
is common for populations to rise and fall from month-to-month. It is common
for the mix of clients in a given program some of whom have different per diems
to change.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Some
of those changes are predictable and we forecast for them. During June, several
of our programs experienced this sort of </font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

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</font></div>


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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">revenue
decline or per diem mix issue. The majority of the population issue occurred
within three programs.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Dolphin
(ph), Woodridge, and Southwood which experienced significant revenue shortfalls
against forecast.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Dolphin
is an outpatient program to provide client services in a clinic as well as the
client&#146;s home or school. Due to the end of school and client vacations
referrals and billings were lower than forecasted. In addition, we submitted a
proposal to our managed care organization to operate a summer program to begin
in June. As required we hired and trained staff only to learn of a delay in
processing referrals by the managed care organization that delayed opening of
the program until July.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">All
Pennsylvania providers who submitted proposals were equally affected by this
delay.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Woodridge
and Southwood are residential and outpatient abuse and medical detox treatment
programs, serving adults and/or juveniles. In June, at Woodridge and Southwood,
the programs were reaching their fiscal year contractual limits earlier than
expected. And as a result some clients had to be released from care until the
new budget became effective. This action coupled with several AWOLs &#151; clients who
left against medical advice &#150; and on hold admissions caused the final month of
our forecast to be inaccurate.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">In
all of these cases an error was made in the development of the forecast. We
failed to anticipate the degree and the scope of the downturn. The error in the
forecast was not identified until actual results were prepared for the forecast
numbers. To mitigate the potential of this re-occuring going forward we have
initiated weekly reviews of our forecasted numbers.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Our
review of the population numbers in July indicate the populations in client mix
are returning to normal levels, we have double checked these (indiscernible) to
be assumptions on our forecast and we do not perceive likelihood of a repeat of
this revenue shortfall in the forecast.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">John
has dealt with the issue of the Accounts Receivable changes on the expense
side. I&#146;m going to focus on the operational expense issues.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">The
largest portion of the expense miss (ph) was associated with personnel. In our
industry employee turnover, especially among front-line employees, is an issue
we deal with on a regular basis. Obviously we budget the required level of
manpower to meet our contractual obligations and the needs of our clients to
work hard on &#150; and we work hard to keep these positions full.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Nevertheless
we know from experience that it is normal for a number of the positions in our
manpower table to be unfilled at any one time. To provide as accurate of
forecast as possible we estimate our personnel costs based upon the normal
personnel vacancy factor for each of our programs. In June we experienced an
unusually low vacancy percentage and as a result personnel expenses exceeded
our forecast levels. In some, a significant number of small but unusual factors
combined to cause our expenses to be higher than anticipated.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">As
Harry indicated in our preliminary results release, we have taken aggressive
measures to ensure that our assumptions are accurate and that this situation
does not recur. During the past week, we have spent many hours reviewing our
forecast in detail to ensure its accuracy and that we have the proper
monitoring regimen in place to identify errors or problems early in the
process.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">In
addition, we have had intensive sessions with our controllers and regional vice
presidents to stress accountability for performance and ensure that we meet our
expectations. During these sessions, we reviewed revenue, population,
population mix issues, and our expenses going forward to ensure they are in
line with our forecast.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">We
have instituted weekly forecasts meetings during which Accounts Receivable will
receive heightened attention. This is an enhancement from our monthly meetings.
We have focused on the issues relative to Dolphin, Woodridge and Southwood to
identify the specific revenue and Accounts Receivable issues and why they were
not appropriately forecasted. Appropriate action have been taken.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Let
me turn to the projects and programs receiving the most attention right now.
First of all New Morgan. We continue to work with the Bureau of Immigration and
Customs enforcement as well as the New Morgan bureau to convert the facility to
a non criminal alien detention center. I expect to be able to report on the
viability of this option at the close of Q3.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Secondly,
Moshannon Valley. I&#146;m advised that as I&#146;m speaking to you this morning the
Bureau of Prisons is meeting at the highest levels to conduct the final review
of our contract modification. As we all know, government does not move at the
pace of private enterprise but I expect to receive notification of the final
approval of the modification shortly. When it is received we will execute the
construction contract immediately.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Given
the delays that we have experience in working through the BOP process we are
taking a conservative view and we now anticipate opening the facility during Q1
&#145;06.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Jos-Arz
continues to experience a slower than expected startup while the demand exist
while the referral process in place in the District of Columbia is painfully
slow. No less than the United States Senate oversight committee on the district
is working to help us streamline and speed up the process.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Next
at Southern Peaks. Yesterday we were excited to learn that our license
inspection occurred with no exceptions and we have been granted the three
licenses necessary to operate the program. Further we received our first
clients late yesterday and we expect to be at full budgeted capacity by the end
of the year.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Last
year we announced plans to operate juvenile detention centers and regional
treatment center in Plankinton, South Dakota. Our announcement was based upon
the following.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">First
of all an outstanding partnership with Plankinton and the Aurora County
officials. Secondly, the sincere and publicly expressed desire by senior
government officials to return the more than 200 children being treated
out-of-state to South Dakota. Third the very high-cost being experienced by the
state for out-of-state placement and our ability to offer a profitably at a rate
that would save the taxpayers significant dollars.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Four
the reality that residential treatment is best provided in an environment in
your home and with the support and active involvement of parents.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Fifth,
a commitment from senior state officials to create a special rate that would
allow Cornell to meet the needs of clients rejected by other providers in the
state and, finally, the availability of an excellent facility suitable for
multiple programs that could be leased for long-term and not require any
capital investment.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">The
economics of our project are excellent (indiscernible) juvenile detention
center and the residential treatment center operate together. In fact, the
detention center was to be one of the feeders into the RTC. As you know, the detention
center opened in May and the RTC was to open this month.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Last
Thursday, while we received the needed license to operate the RTC we were
frustrated to learn that we were being granted an initial rate that while the
highest in the state it is insufficient to support the level of care and
treatment the young people need. We have received assurances from a number of
key policy leaders in the state regarding our rate but in the end, it was not
what we anticipated. The state is in the midst of a formal rate setting process
specifically designed to establish a rate at the level required for the
services needed. Unfortunately, we are advised the process will take
approximately six months.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">As a
result, I&#146;m announcing that we have decided to delay the opening of the RTC and
to temporarily suspend operations at the detention center. While we are
disappointed we recognize that there continue to be many South Dakota clients
served by the state who need our service and that we have the commitment and
the tenacity to pursue this project through this delay.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Thus
we have decided to retain our lease on the facility while we pursue the needed
rate and will reopen both the detention center and the residential treatment
center when that rate has been achieved. This action will result in a reduction
in startup costs for the remainder of this year.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Turning
to our 976 bed youthful offender program at Walnut Grove, Mississippi, this
transitioned from the previous provider very well. We assumed the remaining 2
1/2 years of an existing operating agreement which has an additional 2-year
auction. This program should produce $10.8 million in annualized revenue when
it reaches the expected operating level of 925 beds during Q3 of &#145;05.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Finally
as reported the Regional Correctional Center in Albuquerque opened on July 3rd.
As expected we have multiple customers and the current population is
approximately 100. Working with multiple federal agencies is a challenging
experience involving multiple operating procedural requirements, varied initial
inspection regimens and a wide range of individual signoffs. Our ramp up has
been a bit slower than expected. We anticipate this will soon change since
demand remains strong.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">The
remodeling work on the second tower will begin within two weeks with opening
scheduled for Q4. Once again given the process of dealing with multiple
jurisdictions we are taking a conservative view and revising our estimate for
full ramp up to early Q2 of &#145;05.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Since
our last call, several new programs have been added. Our announcement of a $1.9
million alternative education program for the Philadelphia&#146;s school district
spins off of our very successful entrance into this market with the Harrisburg
Academy. This program will commence service for the &#145;04 &#145;05 school year. We
expect additional growth in this service line.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">The
$1.3 million award of a federal community corrections contract marks our
entrance into the Nevada market. You will recall that this 65 bed contract
award and the facility we purchased will accommodate up to 100. The returned 65
residents are good and we fully expect to utilize the full capacity of the
building as we move forward.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">I&#146;m
also pleased to tell you that our rate negotiations in Pennsylvania have been
successfully completed with results that meet our expectations. These new rates
were effective July 1st.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">In
conclusion, while we are disappointed about Q2 we have not and will not lose
our focus on running quality programs, growing the Company and achieving our
goal of increasing long-term shareholder value.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">I&#146;ll
now turn it back to John for a review of our forecast for the remainder of the
year.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;John Nieser <i><font style="font-style:italic;">&#160;- Cornell Companies - Treasurer, Acting CFO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;We expect GAAP earnings for the third quarter
of 2004 to range from a loss per share of 8 cents to a loss per share of 4
cents on an as reported basis. Pro forma earnings which exclude preopening and
startup costs in new facilities and losses associated the New Morgan Academy
are expected to range from earnings of 8 cents per share to earnings per share
of 12 cents in the third quarter. For the full year, we expect earnings per
share to range from 3 cents to 7 cents on an as reported basis and to range
from 53 to 57 cents on a pro forma basis which excludes preopening and startup
costs of new facilities, the charge on the early extinguishment of debt and
losses associated with New Morgan Academy.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">The
revisions to previous guidance reflect the actual results for the six-month
ended June 30, 2004, the charge on the earliest extinguishment of debt and the
additional finance expense for the remainder if 2004 and revisions from the
impact of startup projects. At this time I will turn the call back to Harry.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Before we open Q&amp;A I did want to address a
couple of topics that are important on strategic matters. As we mentioned on
our first quarter earnings call we have retained a financial adviser,
specifically J.P. Morgan Chase, to assist us in evaluating proposals where
appropriate. Although our Company is not on the block we remain open to
reviewing opportunities as they present themselves to us and in fact the
Company and its board have reviewed a number of these opportunities. Since 2002
at least five companies or groups have approached Cornell about potential
deals, or combinations. We have had discussions with each of these groups at
various levels of detail. Our discussions with one of these companies ended
after involved high-level negotiations. Management spent weeks focusing on this
opportunity and Cornell spent hundreds of thousands of dollars in professional
fees in connections with these negotiation. In the end for several reasons the
discussions were terminated.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Due
to our confidentiality obligations I&#146;m not at liberty, really, to discuss
anything further about these negotiations. At this time, though, we are not
engaged in any active discussions with any party. However we will continue to
explore and respond to opportunities if and when they arise and the board is
keenly achieving to its judiciary duties in these matters.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Let
me say a few more words about our strategic direction. We have received
suggestions from several shareholders that we should actively explore the sale
of the Company. Management and its board have spent a very significant amount
of time on the strategic alternatives. If anything we have spent too much time,
based on the extensive experience described above, management and the board
believe they are well informed about the potential market transactions
available to Cornell.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Let
me reiterate our position. We intend to continue to manage this Company for the
long-term. We are not ignoring the fact there were some mistakes made this
quarter and in the past. However we have never lost our focus and I want to
emphasize that our focus goes beyond 2004 and 2005. There have been a number of
positive developments this year and we expect that trend to continue throughout
the year. We have stated repeatedly that 2 &#145;05 will be the year that will set
this Company on a course to generate meaningful and more consistent returns for
our shareholders and we have not wavered from that goal.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">With
that I&#146;d like to open the call for questions.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8</font></p>

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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="color:#6B9915;font-weight:bold;letter-spacing:2.0pt;margin:0in 0in .0001pt;text-transform:uppercase;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;letter-spacing:0pt;text-transform:none;">QUESTION AND ANSWER</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operator</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;(OPERATOR INSTRUCTIONS) David Tomblin (ph)
J.P. Morgan.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;David Tomblin <i><font style="font-style:italic;">&#160;- J.P. Morgan - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;I had a question relating to regional
corrections, wondering if you could give us a sense of what level you will be
at breakeven and also just commentary on additional capacity being brought on
before you&#146;re actually at break even on the existing tower? Thanks.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;David, good morning. This is Tom. We
anticipate breakeven population to be about 400.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;David Tomblin <i><font style="font-style:italic;">&#160;- J.P. Morgan - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;You mentioned you would be full occupancy in
second quarter next year. When do you think you might be at break even and is
that cash flow break even or GAAP break even?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;We believe that by the end of the year we are
going to be about 700, 750 when you include both towers together.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;David Tomblin <i><font style="font-style:italic;">&#160;- J.P. Morgan - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Okay so you have no doubt that the right thing
to do is continue renovating second tower and still you won&#146;t hurt profits so
you will be at breakeven capacity well before then?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;David I&#146;m sorry you&#146;re breaking up, we cannot
hear the question.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;David Tomblin <i><font style="font-style:italic;">&#160;- J.P. Morgan - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Yes it sounds like you have no doubts about
getting to breakeven capacity and not incurring further losses by opening a
second tower ahead of getting ahead of your skis, so to speak?</font></b></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman">&nbsp;</font></b></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;No we do not and in fact there&#146;s &#150; the second
tower is configured a bit differently in that it has enhanced increased
programming space and some of our customers are more inclined to engage that
space as opposed to tower one. Clients who would or inmates who would be with
us for a longer-term would probably occupy the second tower. We believe that we
are on track for about 700, 750 by year&#146;s end.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operator</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Tony Randall (inaudible).</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tony Randall <i><font style="font-style:italic;">Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Did you guys say that you have been spending
too much time exploring strategical alternatives? Did I hear that right?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;I said we have spent a lot of time, this is
Harry Phillips, we have spent a lot of time exploring strategic alternatives
over the last 2 years and I said we had at least five different groups that
approached us, and that we engaged in discussions in some one form or level or
another.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tony Randall <i><font style="font-style:italic;">Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;And that&#146;s taken up, you&#146;re just taking away
focus and the reason these numbers are so bad and the reason that every quarter
has been bad for the last several?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;No I didn&#146;t say. I said that we spent a lot of
time in conversations with people.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tony Randall <i><font style="font-style:italic;">Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;And then I thought you said too much time was
taken away from focus, is that not accurate?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Well I said yes I said if anything the point
was that we had spent a lot of time on this issue and we have spent an
inordinate amount of time on this issue and so that is the answer to the
question that to the question are we stonewalling people or are we engaged in</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">listening
to people when they approach us. That was the reason for that statement.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tony Randall <i><font style="font-style:italic;">Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;So you are not doing right by the owners of
the Company and you&#146;re blaming us for it? Is that what I am supposed to take
out of this?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;No we are not using any kind of excuse for
performance the point was we just spent a lot of time on it. No we are not
giving any kind of excuse for performance at all.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operator</font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Philip Schipper (ph) with Hartford Management.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Phil Schipper <i><font style="font-style:italic;">&#160;- Hartford Management - Analyst</font></i></font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Given some of the recent execution problems I
would call them and sort of widespread systematic issues we&#146;ve had with
completing projects and just real little things across the board leads me to
believe there is some systematic lack of execution here which falls on
responsibility of management. And I know you guys have said you are
disappointed. As shareholders we are disappointed as well. What can you say to
improving our execution?</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;This is Tom. I&#146;m sorry &#150; I did not get your
name.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Phil Schipper <i><font style="font-style:italic;">&#160;- Hartford Management - Analyst</font></i></font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;My name is Phil Schipper.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;First of all, nobody is walking away from
responsibility here. Clearly June did not meet our expectations. The things
that happened during this month we believe were extraordinary and out of the
usual. We have taken very aggressive measures, we have reviewed performance, we
have enhanced accountability, we have reviewed structures and systems and we
believe that we are back on track. Some things happened during the month of
June, frankly, that were not forecasted, there were some human error here and
we believe firmly that we are back on track going forward through July and for
the remainder of the year.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Phil Schipper <i><font style="font-style:italic;">&#160;- Hartford Management - Analyst</font></i></font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Right. You had said that earlier. I guess what
I was really trying to get at is the consistent quarter over quarter
disappointments and lack of capitalizing on great opportunities that we have as
a company. And that leads me to believe to some extent that something needs to
be done. Either we bring in consultants, we bring in someone new to examine the
strategic alternatives besides J.P. Morgan or you know? We overhaul management
but, overall, there have been execution problems quarter over quarter and time
and time again. And I understand that maybe June was a bad month but what about
the months before that and (indiscernible) through the project?</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;This is Harry Phillips. We met our guidance
the first quarter and we were on track for the first two months of the second
quarter. And we are, we&#146;ve got a lot of projects going on, small company but we
got a lot of projects going on. And for the most part these projects are moving
forward. Dates move from time to time, projections have moved primarily because
of governmental activity for one reason or another. But we are still moving
forward and we&#146;re still highly competent that in &#145;05 or whenever that run rate
appears we will still be at that 100 million level. Nothing has changed in that
regard. So &#150;</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operator</font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Nelson Obus with Wynnefield.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Nelson Obus - <i><font style="font-style:italic;">Wynnefield</font> - Analyst</i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Hi I&#146;m a recent shareholder and I got involved
here because of the potential of the Company. I must say I&#146;m singularly
unimpressed with the execution I&#146;ve seen up until now. I have a very specific
question. You did give us some sense of what the operational problems were in
the Company and what you&#146;re doing to fix them. In terms of facilities that are
operating. I would like to focus on the facilities that have not yet reached
operational status and let&#146;s take Plankinton as an example. It&#146;s fine to shut
Plankinton to defer the opening of it, but it&#146;s really ugly public relations
for the Company. There&#146;s an AP article out today. I don&#146;t know if you&#146;ve seen
it, I don&#146;t know who Lou Siebert is &#150; a Republican from South Dakota said he
was puzzled that Cornell would spend money on the center and not have some idea
of a rate the state was willing to pay and he is quoted saying &#147;I think we need
to get to the base of it and find out who&#146;s making what decisions and why&#148; &#150;
which is something I think the shareholders need to know too &#150; and if there&#146;s a
misunderstanding somewhere that needs to be cleared up, etc. I mean even if
there is a political motivation here that&#146;s a very ugly shot at the Company and
at our reputation and I guess my specific question is in regard to the
oversight of projects that have not yet</font></b></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10</font></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">opened
I mean, what are you doing there? I appreciate you took us through what you&#146;re
doing now on the operating side but do you have a war room. It seems like every
time we have a goal to get something opened or occupied a certain timetable we
seem to miss it, we always blame it on government. I worked in government for
five years I&#146;ve realized there are ways to work with government, there are ways
not to work with government. It&#146;s a very poor excuse and can you just be
specific about what you do on a day-to-day basis to monitor the politics
involved in developmental projects?</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;This is Tom. First let me talk about
Plankinton. Plankinton was a project we entered into with great expectations.
We continue to have strong expectations for this project. We have delayed it.
What happened last Thursday was, clearly, a surprise to us. We received our
license to operate but the rate that we got was not what we had anticipated. We
have worked cooperatively, we have built a strong legion of supporters up there
to include local representatives, the planning commission and some of the
highest policy decision-makers in the state of South Dakota. We continue to
believe that this project will come forth to fruition for us. What happened was
clearly a surprise and not what we had been promised nor what we had expected.
I have not read the local papers this morning but at any rate the investment we
had in this was virtually nothing so there&#146;s no real downside going in. When we
entered this project we knew that there was little to no investment and this
was all upside. Once this thing occurs we got a facility there that is a
beautiful campus. We got a long-term lease on the facility that is a very very
attractive lease and we intend to activate that lease. It&#146;s &#150; the facility has
multiple uses and we intend to have customer in there and bring forth needed
economic vitality to that community. Relative to the other projects we are
still bullish on them. The regional correctional centers will ramp up. It gets
lower than what we expected. Some things happened you know in this industry
you&#146;ve got an awful lot of moving parts. Federal budgets are challenged at this
point. We are at the end of a federal fiscal year and when that occurs some
things tend to slow down. Unfortunately, that slowdown occurred concomitant
with ramp ups and we had planned. At the time they were not forecasted. We are
upon it right now but the we have every assurance that the FBI, the DEA, the
ATM, the United States Marshal Service, the Bureau of Immigrations and Customs
Enforcement, the state of New Mexico, the Bureau of Indian Affairs, among the
customers that we have lined up will use this facility. We are still bullish on
it. We&#146;re very strong on it. I&#146;m not sure what else I could tell you.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Nelson Obus - <i><font style="font-style:italic;">Wynnefield</font> - Analyst</i></font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;I guess what I&#146;m specifically saying is do you
have a structure in your organization? A war room? A monitoring team to keep
from being surprised. Similar to what you describe you had just implemented in
regard to your operating facilities because, frankly, you shouldn&#146;t be getting
surprised in a pre-operating situation where you know you&#146;re dealing with
politicians and all of those pressures. So, but okay that&#146;s done but
structurally what exists in the Company to monitor is a very specific question.
You told us what you&#146;re doing for the operating facilities. What are you doing
for the facilities that haven&#146;t operated? What kind of a task force is
monitoring developments? Getting intelligence on a say week to week basis so
we&#146;re not embarrassed by politicians shooting their mouth off in the press?</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;If the local level in our regional office is
on the ground. We have people who are responsible for working with these local
communities and our politicians. We have engaged lobbyists on both a national
level as well as a state level that worked cooperatively with our own staff to
monitor these situations. The truth be told what occurs here is a ramp up and a
startup that gets engaged and we forecast early on and we advise as to what is
going to go on but it is very fluid. What happens mid ramp up, some things
happened. Unfortunately they are unavoidable and unanticipated. When they occur
though, we adjust.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Nelson Obus - <i><font style="font-style:italic;">Wynnefield</font> - Analyst</i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Well, I would advise maybe you would look at
the structure which you monitor in these preoperational facilities just as you
are now telling us that you&#146;ve put new procedures in place to monitor the
operating facilities. Thank you.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operator</font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Rick D&#146;Auteuil. Columbia Management.</font></b></p>

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<p style="border:none;font-family:Times New Roman;font-size:10.0pt;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Rick </font></b>D&#146;Auteuil<font style="font-weight:normal;text-transform:uppercase;">.</font><i><font style="font-style:italic;">-
Columbia Management - Analyst</font></i></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;We didn&#146;t touch on one of the issues that has
been outstanding for several quarters or at least a couple of quarters. The
escrow status. Maybe you could touch on that briefly. And my understanding was
you hadn&#146;t given up on that so what are we spending. And what are we &#150;what do
we have to show for it so far?</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Harry Phillips. I think it was Rick.</font></b></p>

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<p style="border:none;font-family:Times New Roman;font-size:10.0pt;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Rick </font></b>D&#146;Auteuil<font style="font-weight:normal;text-transform:uppercase;">.</font><i><font style="font-style:italic;">-
Columbia Management - Analyst</font></i></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Yes, Rick D&#146;Auteuil with Columbia Management.</font></b></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11</font></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

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<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Well, we are continuing to pursue the
perpetrators and the escrow situation. We as I said earlier calls we have got
King and Spalding. We froze accounts we&#146;ve gotten TROs on these people and we
are continuing also to pursue with the authorities and we believe strongly that
the federal government is going to take up this investigation. They are looking
into it as I said on the last call but we are pursuing this matter as hard as
we possibly can and we are going to continue to pursue this matter as hard as
we possibly can.</font></b></p>

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<p style="border:none;font-family:Times New Roman;font-size:10.0pt;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Rick </font></b>D&#146;Auteuil<font style="font-weight:normal;text-transform:uppercase;">.</font><i><font style="font-style:italic;">-
Columbia Management - Analyst</font></i></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;What are we spending on it to pursue it?</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;It varies from month-to-month. It depends on
depositions. It depends on where we are with the groups but I would say we
probably spent a couple hundred thousand dollars on it, just with King and
Spalding so far.</font></b></p>

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<p style="border:none;font-family:Times New Roman;font-size:10.0pt;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Rick </font></b>D&#146;Auteuil<font style="font-weight:normal;text-transform:uppercase;">.</font><i><font style="font-style:italic;">-
Columbia Management - Analyst</font></i></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;My second, not really a question, it is really
a statement. Just that to go on record we own over a million shares as you
probably know. I know there&#146;s been information that you guys finally put out
there regarding the vote on the board of directors. We want to go on record
publicly as saying we voted to withhold against the full slate to send a clear
message to the board. We &#150; I would also say have a no confidence &#150; it&#146;s
basically a no confidence vote in current management. We think the franchise
value is greater than &#150; in the hands of other operators. We, too, are highly
frustrated with the continued string of disappointments and when you say some
mistakes made it just seems like we&#146;re getting far too many mistakes. We&#146;re
hearing about mistakes quarterly if not more frequent than that. It&#146;s probably
not fair to say all surprises are negative surprises but certainly the net of
it, which is negative. I want to go on record as saying that. Thank you.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Thank you. Appreciate it.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operator</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Sheryl Skolnick with Fulcrum Global Partners.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Sheryl Skolnick <i><font style="font-style:italic;">&#160;- Fulcrum Global Partners -
Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;I have more than just 2 questions and I have
to come back in and I need to ask one analyst type questions and then another
and make another question. I have to know a fair amount about how hospitals do
accounts receivable and I&#146;m extremely concerned about all of a sudden a
government receivable showing up as a bad debt. And so my question is
specifically is this. How much was that in the quarter? No. 1. No. 2, what is
the existing accounts receivable on the balance sheet right now? And No. 3 how
much of that is at risk?</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;John Nieser <i><font style="font-style:italic;">&#160;- Cornell Companies - Treasurer, Acting CFO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Sheryl this is John. The items you are
referring to we took the charge on was $130,000. I guess your prospective
question as to future potential as I alluded to we go through on a periodic
monthly basis and look at A. R. every month with new criteria, depending upon
the facts and circumstances at that time. Facts change period to period, as I
set here today I&#146;m not in a position to tell you or give you a range per se. I
don&#146;t have that information but I will tell you that as we go through it, the
point that we feel it is (indiscernible) we take the charge. We perform that
review in accordance with GAAP and if under that process we feel a charge is
warranted we take the charge at that time.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Sheryl Skolnick <i><font style="font-style:italic;">&#160;- Fulcrum Global Partners -
Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;So the $1.5 million of roughly sequential
increase in SG&amp;A was only $130,000 of it was due to the A. R.?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;John Nieser <i><font style="font-style:italic;">&#160;- Cornell Companies - Treasurer, Acting CFO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;I&#146;m sorry?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Sheryl Skolnick <i><font style="font-style:italic;">&#160;- Fulcrum Global Partners -
Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Of the hundred &#150; never mind. Okay. I got the
answer to that question. I guess the next question I&#146;m going to ask is sort of
more of an observation here. When I listen to what you all are telling us I&#146;m
concerned and frustrated by two things.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">One.
You&#146;re missing the totality of what it is that I think we&#146;re all concerned
about. It&#146;s not just a specific project. It is every project. That we are now
having to re-evaluate and look at again and trying to forecast what&#146;s going to
happen with it given the new conditions. It is not just that you missed the
second quarter of this year. It is that you miss the second quarter of this
year after missing lots of quarters in the last 12 months and moreover giving
us the kind of guidance for a fourth quarter of roughly 18 cents and I feel we
are back to where we were a year ago, which is that you had a problem with
rates and a problem with a couple of other things that you know you were going
to have at the end of the second quarter. You guided down for the third quarter
but you said 27 cents in the fourth quarter was in fact feasible and here we
are. So tell me &#150; what is behind your guidance? What is structurally in this
company that gives you the confidence on a day-to-day and</font></b></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12</font></p>

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</font></div>


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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">long-term
basis that you can take the existing projects and the going forward projects
and get to their realized value that we all have come to expect, given what you
said about their potential?</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Sheryl this is Harry. How are you doing today?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Sheryl Skolnick <i><font style="font-style:italic;">&#160;- Fulcrum Global Partners -
Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;I&#146;m all right, thanks.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;The answer to your question on an operating
basis yes we missed June as we said earlier it was a surprise. We were on...</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Sheryl Skolnick <i><font style="font-style:italic;">&#160;- Fulcrum Global Partners -
Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;But, Harry, with all due respect, it is always
a surprise. If it wasn&#146;t a surprise, you wouldn&#146;t miss.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Right, right. Let me finish. First of all, we
had one month there on the operating side that we missed. We expect that
operations for the second six months, the existing operations will tighten up
or will be on budget on forecast, and then we look at what the new projects are
bringing to us. And we feel like that with some of the new projects there with
the exception of this Plankinton thing we are moving forward with all of these
projects. Take you don&#146;t hear about Texas Adolescent Center. That&#146;s the one
that we started and opened in October. It is full and has been full since Day
One.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">And
we have Southern Peaks that is opening early and we think it is going to be
gangbusters. Now we got a few of these that, yes, have the populations are
coming in there are just not coming in at the rate that we had wanted. And so
we&#146;re not negative about any of these projects, we&#146;re very positive about them
and we are bullish. And we&#146;re looking for 2 &#145;05 and we think at that point we
will see some of this fruition. We said all along that &#145;04 was going to be a
transition year we&#146;re kind of moving into a new phase for this Company. Getting
larger. And with that growth we have some pains and we&#146;re well aware of it and
we are managing it.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Sheryl Skolnick <i><font style="font-style:italic;">&#160;- Fulcrum Global Partners -
Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;So, the specific question is when you had that
problem in June where the summer program didn&#146;t open because the approval forms
(indiscernible) was there anybody at the operating level of the Company who
picks up the phone and calls their supervisor and says it&#146;s June we&#146;re not
getting them? This is the sort of thing I&#146;m talking about it&#146;s
operationally&#150;it&#146;s execution issues. Forecasts are one thing but it&#146;s also
getting surprised. It&#146;s just &#150; I guess what I&#146;m saying is at this point you are
not giving me as an analyst or I think your shareholders enough information to
have any confidence that the numbers going forward with the Company currently
structured the way it is are achievable. Given all your comments today, there
are hopes, there are wishes, there are expectations but there&#146;s no structure.
There&#146;s no real level of understanding that you are communicating to us and I
guess I would say that what Nelson Obus said looking to establish a structure
that monitors these things make your expectations realistic, hard and fast,
that you don&#146;t get surprised and you don&#146;t hurt your shareholders in that way,
I think it&#146;s a good idea for whatever it&#146;s worth.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;All right. Thank you.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operator</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Todd Van Fleet, First Analysis.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Todd Van Fleet <i><font style="font-style:italic;">&#160;- First Analysis - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Guys not to pile on. I just want to get a
little bit more detail into what is in the guidance for the rest of this year?
The pro forma guidance I guess in particular. I guess I was a bit surprised to
see that capacity utilization increase sequentially if that&#146;s right to about
100.9 percent, I think for the quarter off a couple percentage points in Q1.
But I think the story has been the reason you missed in Q2 was because there
were population issues in a few different facilities. Is that right?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Correct Todd.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Todd Van Fleet <i><font style="font-style:italic;">&#160;&#150; First Analysis - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;I guess I&#146;m a bit confused because the revenue
turned out to be just a shade up from where it was in Q1 and you would expect
to get that sequential bump from the extra day and given the population
increase by a couple percentage points I guess I would expect revenue to be up
higher than where it was so are we looking really at a mix issue and a pricing
issue? Is that what the problem was in the shortfall in the current quarter
then coupled with some of these higher expenses?</font></b></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13</font></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;There were some expense issues, Todd, that
primarily were personnel in nature. There were some per diem mix issues within
a couple of our facilities and in addition we had some lower than forecasted
revenue in three of our primarily three of our programs that went against our
forecast lower than we had forecasted.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Todd Van Fleet <i><font style="font-style:italic;">&#160;- First Analysis - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;So as I think about just to tell you what&#146;s on
my mind and looking at the rest of 2004, if the original guidance say going
back to quarter, quarter and a half whatever for the year was 90 cents and then
the refinancing was completed and I think you said 17 cents EPS was going to be
the hit related to interest charges that gets you down to 73 cents or so and
there was some additional charges or the way Q2 shook out here probably get you
down to 66 67 cents and now we&#146;re seeing the guidance I think it&#146;s 53 to 57 if
I am correct. And I think, along with that, you said that you expect startup
costs to be less than what they perhaps would have been previously. So just
trying to understand what it is that gets us from what is in my view or my mind
anyway a 66, 67 cent figure for EPS on a pro forma basis for 2004 down to the
53 to 57 cent range that you&#146;re guiding to at this point and what are the
factors that kind of bridge that gap?</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;John Nieser <i><font style="font-style:italic;">&#160;- Cornell Companies - Treasurer, Acting CFO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;This is John and walking through your analysis
the final piece that you have not quantified is, with respect to when we spoke
of the impact on the balance of the year for the startup projects particularly
RTC provisions and our forecast for that as well as Jos-Arz. So the reduction
in the forecasts beyond items you mentioned is primarily attributable to that
aspect.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Todd Van Fleet <i><font style="font-style:italic;">&#160;- First Analysis - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;So it&#146;s really kind of slower than expected
ramp than some of these other more startup related facilities that are causing
the losses in those facilities or rather the margins to be less than maybe you
had forecasted previously?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;John Nieser <i><font style="font-style:italic;">&#160;- Cornell Companies - Treasurer, Acting CFO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;That&#146;s correct.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Todd Van Fleet <i><font style="font-style:italic;">&#160;- First Analysis - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Okay. Just one follow-up then &#150; can you
comment on what the status is of any SEC inquiries?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Todd, this is Harry. There has been no change
in any kind of SEC matter. Since our last conference call we have not had any
communications with the SEC and when we do get requests or whatever we
obviously follow-up with whatever they are requesting and we cooperate in every
way. We have not had anything from them.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operator</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Zachary George with Pirate Capital.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Zachary George <i><font style="font-style:italic;">&#160;- Pirate Capital - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;I have two questions and I would like to make
a statement. First of all regarding the Regional Correctional Center in
Albuquerque. What occupancy level is assumed by your 2004 guidance?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;I&#146;m sorry? What occupancy level was assumed in
2004 guidance?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Zachary George <i><font style="font-style:italic;">&#160;- Pirate Capital - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Right for the RCC in Albuquerque?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Our original guidance, we had the facility
fully ramped up by the end of the year.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Zachary George <i><font style="font-style:italic;">&#160;- Pirate Capital - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;And currently?</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;I&#146;m looking at somewhere between 7 and 750 by
the end of the year.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Zachary George <i><font style="font-style:italic;">&#160;- Pirate Capital - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;And you are not worry about that given the
current population at roughly 100?</font></b></p>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14</font></p>

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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;We have some events that we believe are going
to unfold that will pick this up. We are looking at full occupancy sometime
during early Q2 of &#145;05.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Zachary George <i><font style="font-style:italic;">&#160;- Pirate Capital - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Can you also provide any additional color on
progress you have made in getting a contract with New Morgan? Seems like
nothing at all has changed.</font></b></p>

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<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Tom Jenkins <i><font style="font-style:italic;">&#160;- Cornell Companies - President and COO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Again it has been equally frustrating with us.
We are working with the Bureau of Immigrations and Customs Enforcement; we are
working with the New Morgan bureau &#150; the issue is adjusting some zoning there.
There are some new owners in the bureau and it was another thing where
ownership of the bureau changed hands. We are working with them and as I
reported earlier I expect during our next call to have something affirmative to
report one way or the other. On our activities with the bureau.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Zachary George <i><font style="font-style:italic;">&#160;- Pirate Capital - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Harry, based on the comment you made regarding
the work you&#146;ve completed with an investment adviser based on conversations
that I&#146;ve had, nobody should walk away from this call thinking that you&#146;ve
shopped this Company around in good faith. Our sources are indicating that many
of the parties you&#146;ve spoken to have been turned away by you and if there are
actually five companies who have approached you then clearly what makes sense
to us in this case is an option. We own at this point 7 percent of the Company
and I&#146;m going to reiterate on this call the request that I made in person to
you last week that the poison pill be rescinded and that you retain an
investment adviser to fully explore strategical alternatives here. This
management team continues to prove its inability to deliver value to
shareholders. You&#146;ve consistently missed earnings and project completion targets
you&#146;ve set for yourselves and it&#146;s actually infuriating to me to hear any
mention of so-called growth strategy here when you struggle to manage your
current assets profitably. Given the track record we have seen and the current
demands of the shareholders that are being voiced on this call we see that any
board member who continues to support you and your parent strategy to buy
revenue at any cost is clearly breaching their fiduciary duties. We still have
our capital being wasted here and our Company is been undermanaged. It is our
view that Cornell is worth far more that its market value implies and we are
not going to let you guys destroy this Company. It is time for you guys to do
the right thing by shareholders and deliver value through the sale of the
Company. Clearly after seeing the results of the vote and hearing from us and
other shareholders it should be clear to you one way or another that your time
at Cornell is limited. The shareholder basic clearly wants you guys to explore
the sale of the Company. Even if we are unsuccessful in selling the Company in
the short-term ultimately the current board members are going to be removed and
current management will be replaced.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">If
you do not announce that you are making any progress toward retaining investment
adviser and exploring actively exploring the sale of the Company we&#146;re going to
make a formal proposal to the board that Harry you as CEO be removed and that
an interim CEO take your place to get the job done.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">We
are currently conducting interviews ourselves to find a new CEO for the company
should one be required. The bottom line to us is that no matter what happens in
the next year, we are going to be here and you won&#146;t.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">The
only real choice here is whether you want to leave the Company on a positive
note having represented our interests or whether you prefer to be asked to
leave by the shareholder base.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operator</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Ross Taylor with Caxton and Associates.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Ross Taylor <i><font style="font-style:italic;">&#160;- Caxton and Associates - Analyst</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Ross Saylor and, Harry, first I want to have a
chance to say that it&#146;s nice to not be the only voice of frustration on this
call.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">I
think it&#146;s very clear that you have lost the confidence of the shareholders. My
hope is that the board members who are listening here this. that they look at
and recognize that you and your board and your management team lack the skills
necessary to exploit the many opportunities that are in front of shareholders
and that as a result, the expeditious sale of this Company or the replacement
of its senior management team are the only two options facing the board at this
point in time.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">I
think the record speaks for itself and it&#146;s not a matter of whether or not
there is a specific excuse for each and every failure you have laid out. The
answer is, as I think Sheryl pointed out there has been a litany of failure and
it&#146;s time that that litany stop and I do not believe from my 20 plus years as a
professional investor that you can recapture shareholder confidence in any
reasonable time frame with your current management team.</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;text-transform:uppercase;">&nbsp;</font></b></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">Therefore
as I said your fiduciary responsibility compels you to either sell this Company
or to replace the senior management team. Thank you.</font></b></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>


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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operator</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Ladies and gentlemen, this concludes the question-and-answer
session for today. I&#146;d like to turn conference back to management for any
concluding comments. Please go ahead.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;Harry Phillips <i><font style="font-style:italic;">&#160;- Cornell Companies - Chairman
and CEO</font></i></font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Thank you for joining us today. I just want to
reiterate that we are just heard from Ross and from Zachary and the management
and the board take it very seriously. We are going to talk about it at our next
board meeting and it will be a decision the board will take up. If there&#146;s a
decision to be made the board will take it up. In the meantime we are going to
grow this Company. We&#146;re in it the long-term and we believe that our strategic
position is valid and we will go forward with it. We will be looking forward to
talking to you the next quarter and hopefully with more positive news. Thank
you very much.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="border:none;font-weight:bold;line-height:normal;margin:0in 0in .0001pt;padding:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">Operator</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="left" style="color:#003399;font-variant:small-caps;font-weight:bold;margin:0in 0in .0001pt;text-align:left;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;font-variant:normal !important;font-weight:normal;">&#160;Ladies and gentlemen, that concludes the
Cornell Companies second quarter 2004 results conference. If you would like to
listen to a replay of today&#146;s conference you may dial 303-590-3000 or 1 800 405
2236. Using pass code 11003377 pound. Thank you again for your participation in
today&#146;s teleconference. And you may now disconnect.</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="color:#6B9915;font-weight:bold;letter-spacing:2.0pt;margin:0in 0in .0001pt;text-transform:uppercase;"><b><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;letter-spacing:0pt;text-transform:none;">DISCLAIMER</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p style="color:gray;margin:0in 0in .0001pt;"><font size="2" color="black" face="Times New Roman" style="color:windowtext;font-size:10.0pt;">THE
INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF THE
COMPANY&#146;S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE
TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE
REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES THE COMPANY
ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON
THE INFORMATION PROVIDED IN ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW
THE APPLICABLE COMPANY&#146;S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY&#146;S
SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">16</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="2" width="100%" noshade color="gray" align="left">

</font></div>


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<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES TO GAAP</font></b></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In his remarks set forth in this Exhibit
99.1, Mr. Nieser references earnings before interest, taxes, depreciation and
amortization (EBITDA) which is a non-GAAP financial measure.&#160; A non-GAAP financial measure is a numerical
measure of a company&#146;s performance that either excludes or includes amounts
that are not normally excluded or included in the most directly comparable
measure calculated and presented in accordance with GAAP.&#160; The Registrant believes that the additional
non-GAAP measures are useful to investors for financial analysis.&#160; Management used these measures internally to
evaluate its operating performance and the measures are used for planning and
forecasting for future periods.&#160; However,
non-GAAP measures are not in accordance with, nor are they a substitute for,
GAAP measures.&#160; The following reconciles
each non-GAAP financial measure to its most directly comparable GAAP financial
measure.</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="43%" valign="bottom" style="padding:0in 0in 0in 0in;width:43.02%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="26%" colspan="5" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:26.0%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Three
  Months Ended June 30,</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="26%" colspan="5" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:26.0%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">Six
  Months Ended June 30,</font></b></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="43%" valign="bottom" style="padding:0in 0in 0in 0in;width:43.02%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2004</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="border:none;border-top:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border-bottom:solid windowtext 1.0pt;border-left:none;border-right:none;border-top:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2003</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2004</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="border:none;border-top:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border-bottom:solid windowtext 1.0pt;border-left:none;border-right:none;border-top:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="center" style="margin:0in 0in .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;font-weight:bold;">2003</font></b></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="43%" valign="bottom" style="padding:0in 0in 0in 0in;width:43.02%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="43%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:43.02%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">GAAP income from operations</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4,710</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8,196</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10,555</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15,974</font></p>
  </td>
  <td width="0%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="43%" valign="bottom" style="padding:0in 0in 0in 0in;width:43.02%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="43%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:43.02%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Plus:</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="43%" valign="bottom" style="padding:0in 0in 0in 0in;width:43.02%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Depreciation and amortization</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3,179</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2,604</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6,338</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5,173</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="43%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:43.02%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="43%" valign="bottom" style="padding:0in 0in 0in 0in;width:43.02%;">
  <p style="margin:0in 0in .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Pre-opening and start-up expenses, net of
  start-up revenue</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,546</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">252</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2,599</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">339</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="43%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:43.02%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="12%" colspan="2" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;border:none;padding:0in 0in 0in 0in;width:12.0%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" valign="bottom" bgcolor="#CCEEFF" style="background:#CCEEFF;padding:0in 0in 0in 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="43%" valign="bottom" style="padding:0in 0in 0in 0in;width:43.02%;">
  <p style="margin:0in 0in .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">EBITDA</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9,435</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11,052</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">19,492</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0in 0in .7pt 0in;width:2.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:1.3%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border:none;border-bottom:double windowtext 1.5pt;padding:0in 0in 0in 0in;width:10.7%;">
  <p align="right" style="margin:0in 0in .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">21,486</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0in 0in .7pt 0in;width:.98%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
</table>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">17</font></p>

<div style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

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