UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 30, 2002
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-5680
BURKE MILLS, INC.
(Exact name of registrant as specified in its charter)
IRS EMPLOYER IDENTIFICATION (56-0506342)
NORTH CAROLINA
(State or other jurisdiction of incorporation or organization]
191 Sterling Street, N.W.
Valdese, North Carolina 28690
(Address of principal executive offices) (Zip Code)
(828) 874-6341
(Registrant's telephone number, including area code)
No Changes
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant(1)has filed all
reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes_X_ No___
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of May 10, 2002, there were
outstanding 2,741,168 shares of the issuer's only class of common stock.
Page 1 of 15
BURKE MILLS, INC.
INDEX
PART 1 - FINANCIAL INFORMATION Page Number
-----------
Item 1 - Financial Statements
Condensed Balance Sheets
March 30, 2002 and December 29, 2001 3
Condensed Statements of Operations and
Retained Earnings
Thirteen Weeks Ended March 30, 2002
and March 31, 2001 4
Statements of Cash Flows
Thirteen Weeks Ended March 30, 2002
and March 31, 2001 5
Notes to Condensed Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Part II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 14
SIGNATURES 15
Page 2 of 15
BURKE MILLS, INC.
CONDENSED BALANCE SHEETS
March 30, December 29,
2002 2001
(Unaudited) (Note A)
----------- -----------
ASSETS
Current Assets
Cash and cash equivalents $ 3,848,147 $ 4,144,340
Accounts receivable 3,797,854 2,671,324
Inventories 3,011,945 3,220,194
Prepaid expenses, taxes and other
current assets 214,495 96,087
----------- -----------
Total Current Assets 10,872,441 10,131,945
----------- -----------
Equity Investment in Affiliate 620,592 620,592
----------- -----------
Property, Plant and Equipment - at cost 31,335,973 30,962,533
Less: Accumulated depreciation 19,999,762 19,564,639
----------- -----------
Property, Plant and Equipment - Net 11,336,211 11,397,894
----------- -----------
Other Assets
Deferred income taxes 642,300 606,800
Other 45,769 45,769
----------- -----------
Total Other Assets 688,069 652,569
----------- -----------
Total Assets $23,517,313 $22,803,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 1,178,571 $ 1,178,571
Accounts payable 2,474,400 1,720,067
Accrued salaries, wages and vacation pay 178,335 253,582
Other liabilities and accrued expenses 210,510 168,790
Income taxes payable 93,994 503
----------- -----------
Total Current Liabilities 4,135,810 3,321,513
Long-term Debt 3,767,857 4,098,214
Deferred Income Taxes 1,919,000 1,977,000
----------- -----------
Total Liabilities 9,822,667 9,396,727
----------- -----------
Shareholders' Equity
Common stock, no par value(stated value, $.66)
Authorized - 5,000,000 shares
Issued and outstanding - 2,741,168 shares 1,809,171 1,809,171
Paid-in capital 3,111,349 3,111,349
Retained earning 8,774,126 8,485,753
----------- -----------
Total Shareholders' Equity 13,694,646 13,406,273
----------- -----------
Total Liabilities & Shareholders' Equity $23,517,313 $22,803,000
=========== ===========
Note A: The December 29, 2001, Condensed Balance Sheet has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required for generally accepted accounting principles
for complete financial statements.
See notes to condensed financial statements.
Page 3 of 15
BURKE MILLS, INC.
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
Thirteen Weeks Ended
--------------------
March 30, March 31,
2002 2001
---- ----
Net Sales $ 8,976,145 $ 9,428,274
----------- -----------
Costs and Expenses
Cost of Sales 7,919,250 8,827,042
Selling, General and
Administrative Expenses 698,736 680,650
Factor's Charges 35,482 38,693
----------- -----------
Total Costs and Expenses 8,653,468 9,546,385
----------- -----------
Operating Earnings (Loss) 322,677 (118,111)
----------- -----------
Other Income
Interest Income 9,441 20,957
Gain on Disposal of Property Assets 325 -0-
Other, net 397 1,183
----------- -----------
Total 10,163 22,140
----------- -----------
Other Expenses
Interest Expense 51,775 123,281
Other, net (7,308) 17,202
----------- -----------
Total 44,467 140,483
----------- -----------
Income (Loss) before Income Taxes and Equity
in Net Earnings of Affiliate 288,373 (236,454)
Provision (Credit) for Income Taxes -0- (95,299)
----------- -----------
Income (Loss) before Equity in Net Earnings
of Affiliates 288,373 (141,155)
Equity in Net Earnings of Affiliate -0- 28,190
----------- -----------
Net Income (Loss) 288,373 (112,965)
Retained Earnings at Beginning of Period 8,485,753 8,170,968
----------- -----------
Retained Earnings at End of Period $8,774,126 $ 8,058,003
=========== ===========
Earnings (Loss) Per Share $ 0.11 $ (.04)
=========== ===========
Dividends Per Share of Common Stock None None
=========== ===========
Weighted Average Common Shares Outstanding 2,741,168 2,741,168
=========== ===========
See notes to condensed financial statements.
Page 4 of 15
BURKE MILLS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Thirteen Weeks Ended
--------------------
March 30, March 31,
2002 2001
--------- ---------
Cash flows from operating activities
Net Income (Loss) $ 288,373 $ (112,965)
--------- ---------
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 520,778 580,262
(Gain) on Sale of plant and equipment,
including loss on disposal 375 ---
Equity in earnings of affiliate --- (28,190)
Deferred income taxes (93,500) (95,200)
Changes in assets and liabilities:
Accounts receivable (1,126,530) (582,428)
Inventories 208,249 317,827
Prepaid expenses, taxes & other
current assets (118,408) 58,316
Other non-current assets --- ---
Accounts payable 754,333 787,202
Accrued salaries, wages & vacation pay (75,247) 40,482
Other liabilities and accrued expenses 41,720 162,283
Income taxes payable 93,491 ---
--------- ---------
Total Adjustments 205,261 1,240,554
--------- ---------
Net cash provided by operating activities 493,634 1,127,589
--------- ---------
Cash flows from investing activities:
Acquisition of property, plant and
equipment (459,469) (14,469)
Proceeds from sale of plant & equipment --- ---
--------- ---------
Net cash (used) by investing activities (459,469) (14,469)
--------- ---------
Cash flows from financing activities:
Principal payments of long-term debt (330,358) (294,642)
Proceeds from long-term bank note --- ---
--------- ---------
Net cash provided (used) by financing activities (330,358) (294,642)
--------- ---------
Net increase (decrease) in cash and cash
equivalents (296,193) 818,478
Cash and cash equivalents at beginning of year 4,144,340 1,305,362
--------- ---------
CASH AND EQUIVALENTS AT END OF FIRST QUARTER $3,848,147 $2,123,840
========== ==========
See notes to condensed financial statements
Page 5 of 15
BURKE MILLS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all necessary adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the thirteen-week period ended March 30, 2002
are not necessarily indicative of the results that may be expected for the year
ended December 28, 2002. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 29, 2001.
NOTE 2 - STATEMENTS OF CASH FLOWS
- ---------------------------------
For the purposes of the statements of cash flows, the Company considers cash on
hand, deposits in banks, interest bearing demand matured funds on deposit with
factor, and all highly liquid debt instruments with a maturity of three months
or less when purchased as cash and cash equivalents. FASB No. 95 requires that
the following supplemental disclosures to the statements of cash flows be
provided in related disclosures. Cash paid for interest for the thirteen weeks
ended March 30, 2002 and March 31, 2001 was $52,000 and $123,000, respectively.
The Company had no cash payments for the thirteen weeks ending March 30, 2002
and March 31, 2001 for income taxes.
NOTE 3 - OPERATIONS OF THE COMPANY
- ----------------------------------
The Company is engaged in texturing, winding, dyeing, processing and selling of
filament, novelty and spun yarns, and in the dyeing and processing of these
yarns for others on a commission basis.
The Company's fiscal year is the 52 or 53 week period ending on the Saturday
nearest to December 31. Its fiscal quarters also end on the Saturday nearest to
the end of the calendar quarter.
Revenues from sales are recognized at the time shipments are made to the
customer.
NOTE 4 - USE OF ESTIMATES
- -------------------------
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
NOTE 5 - ACCOUNTS RECEIVABLE
- ----------------------------
Accounts receivable are comprised of the following:
March 30, December 29,
2002 2001
---- ----
Account current - Factor:
Due from Factor on regular
factoring account........ $2,992,207 $2,070,000
Non-factored accounts
receivable............... 805,647 601,000
--------- ----------
$3,797,854 $2,671,000
========== ==========
Page 6 of 15
BURKE MILLS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)(Continued)
NOTE 6 - INVENTORIES
- --------------------
Inventories are summarized as follows:
March 30, December 29
2002 2001
---- ----
Finished and in process.... $1,985,400 $2,263,000
Raw materials.............. 737,719 635,000
Dyes and chemicals......... 179,178 208,000
Other...................... 109,648 114,000
--------- ---------
Total $3,011,945 $3,220,000
========== ==========
NOTE 7 - LINE OF CREDIT
- ------------------------
Pursuant to a loan agreement dated March 29, 1996, and a second amendment dated
January 20, 2000, the Company secured an Equipment Loan facility of $3,000,000.
The Equipment Loan shall be evidenced by the Equipment Note, and shall bear
interest at a rate that varies with the LIBOR rate. The Equipment Note would be
payable in 84 installments. The Company has borrowed $3,000,000 under this line
of credit. Also under the Company's factoring arrangement, the Company may
borrow from the factor up to 90% of the face amount of each account sold to the
factor. As of March 30, 2002 the Company had no borrowings from its factor.
NOTE 8 - LONG-TERM DEBT
- -----------------------
On March 29, 1996, the Company entered into a loan agreement with its bank
providing for a term loan of $6,000,000. The term loan refinanced the two
formerly existing term loans, and accordingly, all term obligations were
consolidated into the one $6,000,000 obligation. This new loan is secured by:
(1) a first Deed of Trust on property and buildings located at the Company's
manufacturing sites in North Carolina, (2) a first lien position on the new
equipment and machinery installed at these manufacturing sites and (3) a first
lien position on the existing machinery and equipment located at the Company's
manufacturing sites.
Under the term loan agreement, interest only was payable monthly until February
1998. Thereafter, principal maturities are payable in the amount of $62,500 per
month for ninety-six (96) consecutive months plus interest at the floating LIBOR
rate plus 1.90%.
Among other things, covenants include a debt service coverage ratio, a limit on
annual property asset acquisitions exclusive of property acquired with the loan
proceeds under this new loan agreement, the retirement or acquisition of the
Company's capital stock in excess of a stated amount, the maintenance of a
minimum tangible net worth which shall increase by a stated amount annually, a
minimum quick ratio, and a maximum debt to tangible net worth ratio.
The annual principal maturities of long-term debt at March 30, 2002 are as
follows:
Current portion $ 750,000
2003/2004 $ 750,000
2004/2005 750,000
Thereafter 625,000 2,125,000
--------- ---------
$2,875,000
Page 7 of 15
BURKE MILLS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)(Continued)
NOTE 8 - LONG-TERM DEBT (continued)
- -----------------------------------
Under the loan agreement, the Equipment Line of Credit was converted to a
$3,000,000 long-term note payable in 84 installments of $35,714, plus interest
at the floating LIBOR rate plus 1.9%. The Company converted the Line of Credit
and began installments on February 29, 2000.
The annual principal maturities of this long-term debt at March 30, 2002 based
on the current amount owned are as follows:
Current Portion $ 428,571
2003/2004 $ 428,571
2004/2005 428,571
2005/2006 428,571
Thereafter 357,144 1,642,857
------- ---------
$2,071,428
NOTE 9 - INCOME TAXES
- ---------------------
The Company uses the liability method as required by FASB statement 109
"Accounting for Income Taxes". Under this method, deferred tax assets and
liabilities are determined based on the differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws.
The items which comprise deferred tax assets and liabilities are as follows:
March 30, December 20,
2002 2001
---- ----
Deferred Tax Assets:
Alternative minimum taxes paid $ 349,000 $ 349,000
Net operating carry forward 283,100 247,600
Charitable contributions
carryover 10,200 10,200
--------- ---------
$ 642,300 $ 606,800
========= =========
Deferred Tax Liabilities:
Accelerated depreciation
for tax purposes $1,914,300 $ 1,972,300
Undistributed earnings of foreign
affiliate, net of tax credit 4,700 4,700
--------- ---------
$1,919,000 $ 1,977,000
========= ==========
Thirteen Weeks Ended
--------------------
March 30, March 31,
Provision (credit) for income taxes 2002 2001
---- ----
consists of:
Deferred $ --- $ (95,299)
Federal --- ---
State --- ---
--------- ---------
$ --- $ (95,299)
========= =========
Page 8 of 15
BURKE MILLS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)(Continued)
NOTE 10 - EMPLOYEE BENEFIT PLAN
- -------------------------------
The Company is a participating employer in the Burke Mills, Inc., Savings and
Retirement Plan and Trust that has been qualified under Section 401(k) of the
Internal Revenue Code. This plan allows eligible employees to contribute a
salary reduction amount of not less than 1% nor greater than 25% of the
employee's salary but not to exceed dollar limits set by law. The employer may
make a discretionary contribution for each employee out of current net profits
or accumulated net profits in an amount the employer may from time to time deem
advisable. No provision was made for a discretionary contribution for the
periods ended March 30, 2002 and March 31, 2001.
NOTE 11 - CONCENTRATIONS OF CREDIT RISK
- ---------------------------------------
Financial instruments that potentially subject the Company to concentration of
credit risk consist principally of occasional temporary cash investments and
amounts due from the factor on receivables sold to the factor on a non-recourse
basis. The receivables sold to the factor during a month generally have a
maturity date on the 21st to the 30th of the following month. At March 30, 2002,
the Company had $2,992,000 due from its factor of which $2,473,000 matured on
April 22, 2002. Upon maturity, the funds are automatically transferred by the
factor to the Company's bank.
NOTE 12 - COMMITMENTS
- ---------------------
a) The Company entered into a supply agreement, dated November 23, 1996, with
its joint venture company, Fytek, S.A. de C.V. to purchase twisted yarns. The
Company agrees to purchase approximately $1,800,000 of twisted yarn annually for
the five years beginning November 1997.
b) The Company entered into a supply agreement, dated November 19, 1996, with
Fibras Quimicas, S.A. to purchase yarn. The Company agrees to purchase yarn
based on the schedule below, beginning February 1, 1997, for a five year period.
Year 1 Approximately $2,600,000
Year 2 Approximately $6,400,000
Year 3 Approximately $7,100,000
Year 4 Approximately $7,700,000
Year 5 Approximately $7,700,000
c) The Company and Titan Textile Company, Inc., signed an agreement which became
effective April 1, 1999, whereby the Company sold its friction texturing
equipment to Titan and in turn will purchase textured yarns from Titan. The
agreement states that the Company will purchase 70,000 pounds per week as long
as the Company has a requirement for textured yarns. When the Company's
requirements exceeds 140,000 pounds per week, the Company will purchase at least
50% of its requirements from Titan. The textured yarn pricing structure will be
reviewed every six months and when POY prices increase or decrease by 5% or
more.
d) During 1996 in connection with a bank loan to the Company secured by real
estate, the Company had a Phase I Environmental Site Assessment conducted on its
property. The assessment indicated the presence of a contaminant in the
groundwater under the Company's property. The contaminant was a solvent used by
the Company in the past but no longer used. The contamination was reported to
the North Carolina Department of Environment and Natural Resources (DENR). DENR
required a Comprehensive Site Assessment that has been completed. The Company's
outside engineering firm conducted testing and prepared a Corrective Action Plan
that was submitted to DENR. The Company has identified remediation issues and is
moving toward a solution of natural attenuation. The cost of monitoring will be
approximately $31,000 per year.
Page 9 of 15
BURKE MILLS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)(Continued)
NOTE 13 - INVESTMENT IN AFFILIATE AND RELATED PARTY TRANSACTIONS
- ----------------------------------------------------------------
The company owns 49.8% of Fytek, S.A. de C.V. (Fytek), a Mexican corporation.
Fytek began operation in the fourth quarter of 1997. The company accounts for
the ownership using the equity method. During the first quarter, the Company had
purchases from Fytek of $332,000 compared to $386,000 in 2001. At March 30,
2002, Fytek owed the Company $32,000 for leased equipment.
Financial information for Fytek is as follows:
STATEMENT OF INCOME
(In thousands of U.S. dollars)
(Unaudited)
1st Quarter
-----------
2002 2001
---- ----
Net Sales $1,002 $1,458
Gross Profit 7 94
Income from continuing
operations (16) 87
Income before taxes (16) 87
Provision for income tax -0- 30
------- -------
Net Income $ -0- $ 57
======= =======
BALANCE SHEET
(In thousands of U.S. dollars)
March 31, March 31,
2002 2001
(Unaudited) (Unaudited)
----------- -----------
ASSETS
Current assets $3,155 $4,091
Non-current assets 181 185
------- -------
Total Assets $3,336 $4,276
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $1,667 $2,762
Non-current liabilities -0- -0-
------- -------
Total Liabilities $1,667 $2,762
Shareholders equity $1,669 $1,514
------- -------
Total Liabilities & Shareholders' Equity $3,336 $4,276
======= =======
Page 10 of 15
BURKE MILLS, INC.
PART II
NOTES TO FINANCIAL STATEMENTS
NOTE 14 - ACCOUNTING FOR POSSIBLE IMPAIRMENT OF LONG-LIVED ASSETS
- -----------------------------------------------------------------
In 1995 the Financial Accounting Standards Board issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of", which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets carrying amount. Statement No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company adopted
Statement No. 121 in the first quarter of 1996 and such adoption did not have
any effect on the financial statements for 2001 or for the thirteen weeks ended
March 30, 2002.
NOTE 15 - EARNINGS PER SHARE
- ----------------------------
Earnings per share are based on the net income divided by the weighted average
number of common shares outstanding during the thirteen week periods ended March
30, 2002, and March 31, 2001.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
2002 Compared to 2001
- ---------------------
The following discussion should be read in conjunction with the information set
forth under the Financial Statements and Notes thereto included elsewhere in the
10-Q.
RESULTS OF OPERATIONS
The following table sets forth operating data of the Company as a percentage of
net sales for the periods indicated below:
Thirteen Weeks Ended
----------------------
March 30, March 31,
2002 2001
------ ------
Net Sales 100.0% 100.0%
Cost of Sales 88.2 93.6
------ ------
Gross Profit 11.8 6.4
Selling, General, Administrative
and Factoring Costs 8.2 7.6
------ ------
Operating Earnings (Loss) 3.6 (1.2)
Interest Expense 0.6 1.3
Other (Income) - net (0.2) ---
------ ------
Income (Loss) before Income Taxes 3.2 (2.5)
Equity in Net Earnings (Loss) of Affiliate -0- 0.3
Income Taxes (Credit) -0- (1.0)
------ ------
Net Income (Loss) 3.2% (1.2)%
====== ======
Page 11 of 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS THIRTEEN WEEKS ENDED March 30, 2002
COMPARED TO THIRTEEN WEEKS ENDED March 31, 2001
Net Sales
- ---------
Net sales for the thirteen weeks ended March 30, 2002 decreased by 4.8% to
$8,976,000 compared to $9,428,000 for the first quarter of 2001. Pounds shipped
increased by .04% compared to 2001, while average sales prices decreased by
4.8%.
Cost of Sales and Gross Margin
- ------------------------------
Cost of sales for the first quarter decreased by $908,000 or 10.3%.
Cost of material used decreased by 6.9% while direct labor and overhead
decreased by 26.1% and 13.7% respectively.
As a result of a 4.8% decrease in net sales and a 10.3% decrease in cost of
sales, the Company's gross margin increased to 11.8% compared to 6.4% in 2001.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general, and administrative expenses for the first quarter of 2002
increased by $18,000 or 2.7%.
Factor's Charges
- ----------------
Factor's charges were .4% of net sales compared to .4% in 2001. There was no
change in the Company's factoring agreement.
Interest Expense
- ----------------
Interest expense for the first quarter decreased $72,000 or 58.0% primarily due
to lower existing interest rates and a lower average long-term debt.
Interest Income
- ---------------
Interest income for the first quarter of 2002 decreased as a result of lower
interest rates earned. Cash has been moved to a higher earning account going
forward.
Equity in Net Earnings (Loss) of Affiliate
- ------------------------------------------
The Company recorded no income from Fytek, S.A. de C.V, its joint venture in
Mexico. The Company's share of net earnings and losses is 50%. Also see Note 13.
Income Before Provision for Income Taxes
- ----------------------------------------
For the thirteen weeks ended March 30, 2002 the Company recorded an income of
$288,000 compared to a loss before credit for taxes and income from its Mexican
affiliate of $236,000 in 2001.
Page 12 of 15
BURKE MILLS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Provision for Income Taxes
- --------------------------
The Company recorded no provision for income taxes of for the first quarter of
2002 compared to a credit for income taxes of $95,000 in 2001. Operating loss
carryovers prevent the Company from incurring income taxes.
Liquidity and Capital Resources
- -------------------------------
The Company sells a substantial portion of its accounts receivable to a
commercial factor so that the factor assumes the credit risk for these accounts
and effects the collection of the receivables. As of March 30, 2002, the Company
had $2,992,000 due from its factor of which $2,473,000 matured on April 22,
2002. The Company has the right to borrow up to 90% of the face amount of each
account sold to the factor.
The Company has an equipment line of credit from its bank under which the
Company was permitted to borrow up to $3,000,000 for the acquisition of
production machinery, and a $1,750,000 Letter of Credit facility. The Company
borrowed $3,000,000 from the line of credit and converted the line of credit to
long-term debt on February 29, 2000 (see Note 8).
The Company's working capital at March 30, 2002, aggregated $6,737,000
representing a working capital ratio of 2.6 to 1 compared with a working capital
of $6,810,000 at December 29, 2001, and a working capital ratio of 3.1 to 1.
As a measure of current liquidity, the Company's quick position (cash, cash
equivalents and receivables over current liabilities) discloses the following at
March 30, 2002:
Cash, cash equivalents and receivables........... $7,646,000
Current liabilities.............................. 4,136,000
---------
Excess of quick assets over current liabilities.. $3,510,000
The Company believes that its cash, cash equivalents and receivables, and its
factoring and credit arrangements will be sufficient to finance its operations
for the next 12 months.
During the thirteen weeks of 2002, the Company acquired and made deposits on new
machinery and equipment of approximately $460,000 as set forth in the
accompanying Statement of Cash Flows. For the balance of 2002, the Company
anticipates the acquisition of machinery and equipment of approximately $740,000
which, together with the acquisitions and deposits on acquisitions incurred to
March 30, 2002, will aggregate an anticipated acquisition of new machinery of
approximately $1,200,000 in 2002. The Company plans to finance its capital from
cash provided from operations and bank financing.
The Company's cash and equivalents decreased for the thirteen weeks ended March
30, 2002, to $3,848,000 from $4,144,000 at December 29, 2001. See accompanying
Statement of Cash Flow.
Forward Looking Statements
- --------------------------
Certain statements in this Management's Discussion and Analysis of Financial
condition and Results of Operations, and other sections of this report, contain
forward-looking statements within the meaning of federal securities laws about
the Company's financial condition and results of operations that are based on
Page 13 of 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Continued)
Forward Looking Statements (contd.)
- --------------------------
management's current expectations, beliefs, assumptions, estimates and
projections about the markets in which the Company operates. Words such as
"expects", "anticipates", "believes", "estimates", variations of such words and
other similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions that are difficult to
predict. Therefore, actual outcomes and results may differ materially from what
is expressed or forecasted in, or implied by, such forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's judgement only as of the date hereof. The
Company undertakes no obligations to update publicly any of these
forward-looking statements to reflect new information, future events or
otherwise.
Factors that may cause actual outcome and results to differ materially from
those expressed in, or implied by, these forward-looking statements include, but
are not necessarily limited to, availability, sourcing and pricing of raw
materials, pressures on sales prices due to competition and economic conditions,
reliance on and financial viability of significant customers, technological
advancements, employee relations, changes in construction spending and capital
equipment expenditures (including those related to unforeseen acquisition
opportunities), the timely completion of construction and expansion projects
planned or in process, continued availability of financial resources through
financing arrangements and operations, negotiations of new or modifications of
existing contracts for asset management and for property and equipment
construction and acquisition, regulations governing tax laws, other governmental
and authoritative bodies, policies and legislation, and proceeds received from
the sale of assets held for disposal. In addition to these representative
factors, forward-looking statements could be impacted by general domestic and
international economic and industry conditions in the markets where the Company
competes; such as, changes in currency exchange rates, interest and inflation
rates, recession and other economic and political factors over which the Company
has no control.
BURKE MILLS, INC.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on 8-K
(a) Reports on Form 8-K - No report on Form 8-K has been filed during
the thirteen weeks March 30, 2002.
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BURKE MILLS, INC.
SIGNATURES
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 thereunto duly authorized.
BURKE MILLS, INC.
-----------------
(Registrant)
Date: May 14, 2002 BY: Thomas I. Nail /s
-------------------
Thomas I. Nail
(President)
Date: May 14, 2002 BY: Ronald D. Nicholson /s
-----------------------
Ronald D. Nicholson
(Principal Financial Officer)
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