Mail Stop 0308
July 8, 2005
Mr. Humayun N. Shaikh
Burke Mills, Inc.
191 Sterling Street, NW
Valdese, North Carolina 28690
Re: Burke Mills, Inc.
Form 10-K for the Fiscal Year Ended January 1, 2005
Filed April 1, 2005
Form 10-QSB for the Fiscal Quarter Ended April 2, 2005
Filed May 13, 2005
File No. 0-5680
Dear Mr. Shaikh:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. If a
comment below requests additional disclosures, please show us in
your
supplemental response what the revised disclosures will look like.
These additional disclosures should be included in your future
filings. After reviewing the information included in your
response,
we may or may not raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the Fiscal Year Ended January 1, 2005
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Results of Operations: 2004 Compared to 2003
Net Sales, page 9
1. We note that your fiscal year ended January 1, 2005 included 52
weeks whereas your fiscal year ended January 3, 2004 included an
extra week of sales, or 53 weeks. We also note your explanation
of
the change in net sales in fiscal 2004 did not include a
discussion
that there was one less week of sales in fiscal 2004, which could
represent a major component of the business reasons for the
overall
change between periods. In circumstances where there is more than
one business reason for the change, please quantify the
incremental
impact of each individual business reason that caused the change
during the year. Please provide us and disclose a revised
explanation for the change in net sales during fiscal 2004 using
all
of the significant business reasons that caused the overall
change.
Refer to Item 303(a)(3) of Regulation S-K.
2. You disclose that sales from new customers approximated $1.7
million which was offset by a decline in sales to existing
customers
due to competitive and credit reasons. Please disclose if you
expect
the decline in sales to existing customers is a trend that you
expect
to affect future periods. Refer to Item 303(a)(3) of Regulation
S-K.
Cost of Sales and Gross Margin, page 9
3. You disclose several cost categories where you experienced an
increase during fiscal 2004. Please disclose if any of these
changes
represent a trend that you expect to continue affecting future
periods. See Item 303(a)(3) of Regulation S-K.
Selling, General and Administrative Expenses, page 9
4. Please tell us and revise your disclosures to provide a
business
reason for the change between periods in selling, general and
administrative expenses. Refer to Item 303(a)(3) of Regulation S-
K.
Liquidity and Capital Resources, page 13
5. Please disclose the information relating to your off-balance
sheet
arrangements in the manner required by Item 303(a)(4) of
Regulation
S-K.
6. You disclose here and in your quarterly report for the period
ended April 2, 2005 management`s decision to discontinue in the
first
quarter of 2005 the factoring arrangement and manage in-house the
collection of your accounts receivable. Please tell us and
disclose
the impact you believe this will have on your liquidity and
related
cash flows. In this regard, we note from your disclosure here and
in
your quarterly report that you are still in the process of
securing a
line of credit. Refer to Item 303(a)(1) of Regulation S-K.
Item 8 - Financial Statements and Supplementary Data
Notes to Financial Statements
Note 1 - Significant Accounting Policies, page 22
General
7. Please tell us and disclose the types of amounts you include in
the cost of sales and the selling, general and administrative
expense
line items. Please tell us whether you include inbound freight
charges, purchasing and receiving costs, inspection costs,
warehousing costs, internal transfer costs, and the other costs of
your distribution network in the cost of sales line item. If you
currently exclude a portion of these costs from cost of sales,
please
disclose:
* In a footnote the line items that these costs are included in
and
the amounts included in each line item for each period presented,
and
* In management`s discussion and analysis that your gross margins
may
not be comparable to those of other entities, since some entities
include all of the costs related to their distribution network in
cost of sales and others may exclude a portion of them from gross
margin, including them instead in line items such as selling,
general
and administrative expenses.
Revenue Recognition, page 22
8. You disclose that revenues are recognized at the time of
shipment.
Please tell us and revise your disclosures to include whether your
stated shipping terms are FOB shipping point pursuant to your
sales
agreements with customers. Please also tell us and disclose when
title passes to the customer and explain to us your return policy.
If your sales agreements do not specify when title passes, please
explain to us why revenue recognition is appropriate upon shipment
rather than upon delivery to and acceptance by the customer.
Refer
to SAB 104.
Accounts Receivable, page 22
9. Please disclose your accounting policy relating to providing an
allowance for doubtful accounts receivable.
Part IV
10. We note your disclosure in the first paragraph on page 35
regarding financial schedules. Please tell us and revise your
disclosures to include Schedule II - Valuation and Qualifying
Accounts disclosing all reserves recorded, including the amount of
allowance for doubtful accounts receivable, for all periods
presented. See Rules 5-04(c) and 12-09 of Regulation S-X.
* * * * *
As appropriate, please send us your response to these
comments
within 10 business days or tell us when you will provide us with a
response. Please furnish a cover letter with your response that
keys
your responses to our comments and provides any requested
supplemental information. Detailed cover letters greatly
facilitate
our review. Please understand that we may have additional
comments
after reviewing your amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that the filing includes all information required under
the
Securities Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
Your supplemental response should be submitted in electronic
form on EDGAR as a correspondence file. Refer to Rule 101(a) of
Regulation S-T. You may contact Milwood Hobbs at (202) 551-3241,
or
in his absence, Donna Di Silvio at (202) 551-3202, or the
undersigned
at (202) 551-3841 if you have questions regarding comments on the
financial statements and related matters. Any other questions
regarding disclosure issues maybe directed to H. Christopher
Owings
at (202) 551-3720.
Sincerely,
Michael Moran
Accounting Branch Chief
Humayun N. Shaikh
Burke Mills, Inc.
July 8, 2005
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