SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
BURKE MILLS, INC.
-----------------
(Name of Registrant as Specified In Its Charter)
N/A
---
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
N/A
4) Proposed maximum aggregate value of transaction:
N/A
5) Total fee paid:
N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing:
1) Amount Previously Paid:
N/A
2) Form, Schedule or Registration Statement No.:
N/A
3) Filing Party:
N/A
4) Date Filed:
N/A
- --------------------------------------------------------------------------------
BURKE MILLS, INC.
- --------------------------------------------------------------------------------
Notice of 2006 Annual Meeting
and
Proxy Statement
- --------------------------------------------------------------------------------
BURKE MILLS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
2006
================================================================================
The 2006 annual meeting of the shareholders of Burke Mills, Inc. ("the
Company") will be held at the executive offices of the Company, 191 Sterling
Street N.W., Valdese, North Carolina, at 2:00 P.M. on Tuesday, May 16, 2006, for
the following purposes:
(1) To elect seven directors to serve until the next annual meeting of
the shareholders and until their successors shall be elected and shall
qualify.
(2) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The close of business on March 29, 2006 has been fixed as the record date
for the determination of the shareholders entitled to notice of and to vote at
said meeting.
Management hopes all shareholders can attend this meeting. Whether or not
you expect to be present, you are requested to date and sign the enclosed proxy
and return it promptly in the enclosed envelope. The proxy will be returned to
any shareholder who attends the meeting and requests such return.
By order of the Board of Directors
Pender R. McElroy
Secretary of Burke Mills, Inc.
April 7, 2006
=================================================
PROXY STATEMENT
=================================================
Annual Meeting of the
Shareholders of Burke Mills, Inc.
to be held May 16, 2006
SOLICITATION AND REVOCATION OF APPOINTMENT OF PROXY
- ---------------------------------------------------
The enclosed appointment of proxy is solicited by the Board of Directors of
Burke Mills, Inc. ("the Company"). It is revocable upon receipt of written
notice of revocation by the Secretary of the Company at any time before it is
exercised. If the enclosed appointment of proxy is signed and returned, the
shares covered by the appointment will be voted at the meeting (and all
adjourned sessions).
The cost of soliciting appointments of proxy will be borne by the Company,
and such costs are not expected to exceed an amount normally expended for a
solicitation for an election of directors in the absence of a contest and costs
represented by salaries and wages of regular employees and officers, who will
carry out any solicitations to be made, which amount is not expected to exceed
$5,000.00.
The mailing address of the principal executive offices of the Company is:
Burke Mills, Inc.
Post Office Box 190
Valdese, North Carolina 28690
The approximate date on which the proxy statements and proxy cards are
first sent or given to shareholders is April 14, 2006.
VOTING RIGHTS
- -------------
The holders of stock of the Company on March 29, 2006 are the only
shareholders entitled to notice of and to vote at the annual meeting of
shareholders on May 16, 2006 and at any adjournments thereof. On March 29, 2006
(the record date) there were 2,741,168 shares of stock outstanding and entitled
to vote. Each share of stock is entitled to one vote.
<page>
VOTING PROCEDURES
- -----------------
If a majority of the shares of the Company issued and outstanding are
present at the meeting in person or by proxy, a quorum will exist.
Each shareholder entitled to vote shall have the right to cast one vote per
share outstanding in the name of such shareholder (a) on the motion before the
body or (b) as to election of directors, for each nominee for each directorship
to be filled. For a motion to pass, the votes cast in favor of the motion must
exceed the votes cast against the motion. Directors are elected by a plurality
of the votes cast; the nominees with the largest number of votes will be elected
up to the maximum number of directors to be elected (which is seven).
Votes by proxy will be tabulated by American Stock Transfer & Trust
Company, the stock transfer agent for the Company. The votes by proxy will be
cast at the meeting by the proxy holders. Any shareholder may vote in person at
the meeting if no appointment of proxy has been made or if the appointment is
revoked. All votes will be tabulated at the meeting by the secretary of the
Company.
Under North Carolina law and under the articles of incorporation and bylaws
of the Company, abstentions and broker non-votes have no effect since a majority
of the votes cast will carry a motion and directors are elected by a plurality
of the votes cast.
SUBSTANTIAL SHAREHOLDERS
- ------------------------
As of March 8, 2006 the following persons are the only persons known to the
Company to be the beneficial owners of more than five percent of the common
stock of the Company (the only voting securities of the Company):
<table>
Title of Name and Address of Amount and Nature of Percent
Class Beneficial Owner Beneficial Ownership of Class
- -------- ------------------- --------------------- --------
<s>
Common Naseus, Inc. 1,443,329 shares 52.7%
Stock Flat 72, Building 383 (Direct)
Road 1912
Manama Town 319, Bahrain
Common Humayun N. Shaikh 1,443,329 shares 52.7%
Stock Nafees Cotton Mills, Ltd. (Indirect)
Ismail Aiwan-i-Science
Shahrah-i-Jalaluddin Roomi
Lahore - 54600, Pakistan
</table>
2
<table>
Title of Name and Address of Amount and Nature of Percent
Class Beneficial Owner Beneficial Ownership of Class
- -------- ------------------- --------------------- --------
<s>
Common Robert E. Bell, III, 232,200 shares 8.47%
Stock Administrator CTA of (Direct)
the Estates of
Robert E. Bell, Jr.
and Andrea G. Bell
P.O. Box 3007
Hickory, NC 28603
</table>
The shares beneficially owned by Humayun N. Shaikh are shares owned of
record by Naseus, Inc. Naseus, Inc., a Panamanian corporation, holds 1,443,329
shares of the Company's stock. Naseus, Inc. is a holding company for business
interests and does not conduct any active operations. Mr. Humayun Shaikh is the
owner of all the stock of Naseus, Inc.
The Company is informed and believes that Robert E. Bell, Jr. and Andrea G.
Bell, husband and wife, owned 232,200 shares of the Company's common stock as
joint tenants with the right of survivorship. On August 31, 2003, Mr. and Mrs.
Bell died simultaneously in a plane crash. The Company is informed and believes
that 116,100 shares of said stock are now held by Robert E. Bell, III,
Administrator CTA of the Estate of Robert E. Bell, Jr., and 116,100 shares are
held by Robert E. Bell, III, Administrator CTA of the Estate of Andrea G. Bell.
The Company is informed and believes that as of March 8, 2006 Cede & Co.
held 1,144,015 shares of the Company (41.7%) as nominee for Depository Trust
Company, 55 Water Street, New York, New York 10004, that Cede & Co. and
Depository Trust Company both disclaim any beneficial ownership thereof, and
that such shares are held for the account of numerous other persons, no one of
whom is believed to beneficially own five percent or more of the common stock of
the Company, except for the stock owned by the Administrator, CTA of the Estates
of Robert E. Bell and Andrea G. Bell.
ELECTION OF DIRECTORS
- ---------------------
Seven directors are to be elected at the annual meeting of shareholders to
be held on May 16, 2006. Directors are to be elected to serve until the next
annual meeting of shareholders and until their successors shall be elected and
shall qualify.
The enclosed proxy will be voted in favor of the election of the following
nominees as directors:
3
<table>
<caption>
Amount (Shares)
and Nature of
Name Principal Beneficial Percent
(Age)(Year lst Elected) Occupation Ownership of Class
- ----------------------- ---------- --------------- --------
<s> <c> <c> <c>
Humayun N. Shaikh Chairman of 1,443,329 52.7%
(63) (1978) the Company (Direct and
Indirect)
Thomas I. Nail President of 7,000 0.26%
(58) (2000) the Company (Direct)
William T. Dunn Retired 2,000 0.07%
(72) (1996) (Direct)
Robert P. Huntley Chairman, 5,000 0.18%
(68) (1993) Secretary (Direct)
and Treasurer,
Timber Ridge Lumber Co.
Hickory, NC
Robert T. King Retired 0 0.0%
(79) (2001)
Richard F. Byers Executive Vice 1,000 0.0%
(67) (2001) President of the Company
Aehsun Shaikh Director, 0 0.0%
(33) (1999) Azgard Nine Limited
Lahore, Pakistan
</table>
All nominees are incumbents.
"Direct" ownership means ownership as record owner. "Indirect" ownership
means beneficial ownership other than as record owner.
Mr. Humayun Shaikh serves as Chairman Emeritus of Azgard Nine Limited
(formerly known as Legler-Nafees Denim Mills, Ltd.) (engaged in the manufacture
and sale of denim fabric and garments and production and sale of yarn) of
Lahore, Pakistan. Previously and for more than the past five years he served as
director of that company and of Nafees Cotton Mills, Ltd. Until 1994 he was a
director of Colony Textile Mills, Ltd. (engaged in spinning and weaving of yarn
and dyeing and printing of fabric) and of National Security Insurance Co., Ltd.
(engaged in the writing of property and casualty insurance) both of Lahore,
Pakistan, and so served for more than the five years prior to
4
1994. Mr. Shaikh devotes approximately 75% of his time to the management of the
Company. Mr. Shaikh served as President of the Company from January 1981 until
May 1992, when he became Chairman.
Mr. Nail was appointed on May 15, 2000, and now serves as, President and
Chief Operating Officer of the Company. Prior to that time, Mr. Nail was Vice
President-Finance of the Company, having assumed that office a second time in
June 1997. From March 1994 to June 1997, Mr. Nail was Chief Financial Officer,
Secretary and Treasurer of Alba Waldensian, Inc., Valdese, NC, a manufacturer of
women's intimate apparel and health products. From September 1987 to March 1994,
Mr. Nail was Vice President-Finance of the Company. Prior to 1987, Mr. Nail held
accounting and controller positions with several companies.
Mr. Huntley serves as Chairman and Secretary of Timber Ridge Lumber
Company, Inc., a supplier of hardwood lumber to the furniture industry. Mr.
Huntley has served in this capacity since 1996. He also has business interests
in other areas including real estate. Mr. Huntley is licensed as a certified
public accountant. Mr. Huntley is a member of the board of directors of
Integrity Financial Corporation, a public company having securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934.
Mr. Dunn is retired. From 1978 to 1986 Mr. Dunn was Executive Vice
President and a member of the Board of Directors of E. F. Hutton and Company,
having responsibility for trading, marketing, research and syndication of all
fixed income products to institutional clients. From 1986 to 1991 Mr. Dunn was
Senior Managing Director with Bear Stearns and Company. From 1991 until January
1995 Mr. Dunn was Managing Director of PaineWebber, Inc. In these latter two
positions, Mr. Dunn had responsibility for trading, marketing, research and
syndication of fixed income products to institutional clients in the
international market.
Mr. King is retired. From 1952 to 1969 Mr. King was President and part
owner of Collins Yarn Processing, Inc. in Hickory, NC, a dye house. From 1969 to
1985, Mr. King was manager of the dye house division of the yarn division of
Collins & Aikman, Inc. in Hickory, NC.
Mr. Byers is Executive Vice President of the Company, having been appointed
to that position on May 15, 2000. Prior to then Mr. Byers was Vice
President-Sales of the Company, having assumed that office in December 1978. Mr.
Byers served as production control manager of the Company from 1968 to December
1978.
Mr. Aehsun Shaikh is a director (a management position) of Azgard Nine
Limited (formerly known as Legler-Nafees Denim Mills, Ltd.) since 1999. Mr.
Shaikh is the son of Humayun Shaikh, Chairman of the Board of the Company.
The Board of Directors of the Company met once during the fiscal year ended
December 31, 2005. All directors attended except Mr. Aehsun Shaikh.
5
BOARD COMMITTEES
- ----------------
The Board of Directors of the Company has two standing committees - Audit
and Compensation.
The Audit Committee is established in accordance with Title 15, U.S. Code,
Section 78(c)(58)(A). Mr. Huntley, Mr. Dunn and Mr. King serve on the Audit
Committee. The Audit Committee met four times during the last fiscal year. The
duties of the Audit Committee are to review the work of the Company's auditors
and to confer with the auditors on matters concerning the annual audit. The
Board of Directors of the Company has adopted a written charter for the Audit
Committee. A current copy of the charter is available to security holders on the
Company's web site at www.burkemills.com. A copy of the charter was included as
an appendix to the Company's proxy statement filed in April 2005. Management
believes that the members of the Audit Committee of the Company are independent
as defined by Rule 4200(a)(14) of the Marketplace Rules of the National
Association of Securities Dealers.
Mr. Huntley, Mr. Dunn and Mr. Shaikh serve on the Compensation Committee.
The Compensation Committee did not meet during the last fiscal year. The duties
of the Compensation Committee are to review, and advise the board on, the
compensation of the Chairman and Chief Executive Officer of the Company and the
other executive officers of the Company.
AUDIT COMMITTEE FINANCIAL EXPERT
- --------------------------------
The Board of Directors of the Company has determined that the Board's Audit
Committee has at least one Audit Committee financial expert serving on the
Committee. The name of that expert is Robert P. Huntley. Mr. Huntley is
independent as said term is defined in Rule 4200(a)(14) of The Marketplace Rules
of the National Association of Securities Dealers.
AUDIT COMMITTEE REPORT
- ----------------------
The Audit Committee has reviewed and discussed with management the audited
financial statements of the Company for the fiscal year ended December 31, 2005.
The Audit Committee has discussed with the independent auditors of the
Company the matters required to be discussed by SAS 61 (Codification of
Statements on Auditing Standards, AU ss. 380), as it may be modified or
supplemented.
The Audit Committee has received the written disclosures and the letter
from the independent accountants required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), as it may be modified or supplemented, and
has discussed with the independent accountant the independent accountant's
independence.
6
Based on the review and discussions specified above, the Audit Committee
recommended to the Board of Directors of the Company that the audited financial
statements be included in the Company's annual report on Form 10-K for the
fiscal year ended December 31, 2005.
The members of the Audit Committee are:
Robert P. Huntley
William T. Dunn
Robert T. King
NOMINATING COMMITTEE
- --------------------
The Board of Directors does not have a standing Nominating Committee. The
Board is of the view that it is appropriate for the Company not to have such a
committee since the size of the Board of Directors (seven members) is relatively
small and there has historically been relatively little turnover in membership
on the Board of Directors. If and when a new member of the Board of Directors
becomes necessary, all board members will have input into the nomination
decision.
COMMUNICATIONS TO THE BOARD
- ---------------------------
It is the policy of the Company that any communication from a shareholder
of the Company addressed to a member of the board and sent to the office of the
Company will be promptly sent directly to such board member by management of the
Company.
ATTENDANCE OF BOARD MEMBERS AT ANNUAL MEETINGS
- ----------------------------------------------
The Company does not have a policy with regard to attendance by board
members at annual meetings. Six of the seven members of the board attended the
annual meeting of shareholders held on May 17, 2005.
STOCK OWNED BY OFFICERS
- -----------------------
As of March 8, 2006, the common stock of the Company (the only class of
equity securities of the Company) beneficially owned by the chief executive
officer, Humayun N. Shaikh, by the three most highly compensated executive
officers other than Mr. Shaikh, and by all officers and director nominees as a
group is as follows:
7
<table>
Amount (Shares)
and Nature of Percent
Name/Group Beneficial Ownership of Class
- ---------- -------------------- --------
Humayun N. Shaikh 1,443,329 52.7%
Chairman and CEO Indirect
Thomas I. Nail 7,000 0.26%
President and COO Direct
Richard F. Byers 1,000 0.00%
Executive Vice President Direct
William E. Singleton 0 -----
Vice President-Manufacturing
All officers and director 1,458,429 53.2%
nominees as a group (Direct and
(9 persons) Indirect)
</table>
EXECUTIVE OFFICERS OF THE COMPANY
- ---------------------------------
All executive officers of the Company are serving until the next annual
meeting of directors and until their successors have been duly elected and
qualified. The current officers of the Company, in addition to Humayun N.
Shaikh, Thomas I. Nail and Richard F. Byers, are as follows:
William E. Singleton (age 56) is Vice President-Manufacturing of the
Company. Mr. Singleton began employment with the Company on June 20, 2000 as
Vice President-Manufacturing. Prior to that time, Mr. Singleton was a
superintendent with Grover Industries, Inc. in Grover, NC (a yarn manufacturer
and dyer) for three years, a general manager with Doran Textiles, Inc. in
Shelby, NC (a manufacturer of yarn, a weaver and a yarn dyer) for three years.
Prior to that time, Mr. Singleton was a superintendent of dyeing at J. P.
Stevens Co. in Greenville, South Carolina, and a technical manager with M.
Lowenstein and Co. in Lyman, South Carolina.
Pender R. McElroy (age 65) is Secretary of the Company, having assumed that
office in April 1981. Mr. McElroy is a member of the law firm of James, McElroy
& Diehl, P.A., Charlotte, NC, legal counsel for the Company.
Michael B. Smith (age 48) is Assistant Secretary of the Company, having
assumed that office in May 1985. Mr. Smith has been employed by the Company as a
cost accountant since 1978.
8
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
- ------------------------------------------------
All plan and non-plan compensation awarded to, earned by, or paid to the
chief executive officer, Humayun N. Shaikh, and Thomas I. Nail and Richard F.
Byers for the past three fiscal years is shown in the following table:
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
<table>
Name and Other Annual All Other Compensation
Principal Position Year Salary Bonus Compensation
- ------------------------ ------ ---------- --------- ---------------- --------------------------
Humayun N. Shaikh 2003 $210,000 0 $396 0
Chairman and CEO 2004 $210,000 0 $258 0
2005 $210,000 0 $396 0
Thomas I. Nail 2003 $150,000 0 $900 0
President and COO 2004 $150,000 0 $7,278 0
2005 $150,000 0 $6,742 0
Richard F. Byers 2003 $104,988 0 $609 0
Executive Vice 2004 $104,988 0 $1,546 0
President 2005 $104,988 0 $1,510 0
</table>
There is no executive officer of the Company other than those named above
whose total annual salary and bonus exceeded $100,000 for the last completed
fiscal year.
The category of Other Annual Compensation for Mr. Shaikh, Mr. Nail and Mr.
Byers represents the annual premium on group life insurance for each of them on
the amount in excess of $50,000 of coverage and the nonbusiness portion of use
of a company owned automobile by Mr. Nail and Mr. Byers.
The Company has no long-term compensation arrangements with its executive
officers. The Company maintains no defined benefit or actuarial plan. The
Company maintains a 401(k) Plan of which all eligible employees are
participants.
Directors who are employed by the Company are not compensated for services
as directors. Directors not employed by the Company receive compensation for
board service of $2,000 per quarter, payable at the end of the quarter, and
$1,000 for each
9
board meeting and each committee meeting (if such committee meeting is not
combined with or occurs on a day when there is no board meeting). Mr. Humayun
Shaikh receives reimbursement for actual travel expenses incurred while
traveling for the Company.
William T. Dunn, Robert P. Huntley and Humayun N. Shaikh served as members
of the Compensation Committee of the Board during 2005. Mr. Shaikh is Chairman
and CEO of the Company.
The policy of the Board of Directors for compensation of the Chief
Executive Officer and the other executive officers has been and is to compensate
those officers at a level as close to what the board believes is competitive in
the textile industry for companies of comparable size and geographic location
(the piedmont area of North and South Carolina).
The members of the Compensation Committee of the Company are:
William T. Dunn
Robert P. Huntley
Humayun N. Shaikh
TRANSACTIONS WITH RELATED PARTIES
- ---------------------------------
The Company pays Nafees Cotton Mills, Ltd. (Nafees) $24,000 annually toward
the expense of maintaining and operating an office for the Company in Pakistan.
The Company may from time to time purchase yarn from Nafees. During the fiscal
year ended December 31, 2005, the Company has not purchased yarn from Nafees. As
of March 15, 2006, it is not known whether the Company will purchase additional
yarn from Nafees, although such purchases could reasonably be anticipated. Mr.
Humayun N. Shaikh and Mr. Aehsun Shaikh are directors of Nafees, and Mr. Humayun
N. Shaikh and his family control a majority of the stock of Nafees.
COMPARATIVE SHAREHOLDER RETURN
- ------------------------------
The graph which follows compares the yearly percentage change in the
Company's cumulative total shareholder return on its common stock with the
cumulative total return of (a) all United States companies traded on the NASDAQ
stock market and (b) five companies traded on the NASDAQ stock market which
carry NASDAQ Standard Industrial Classification (SIC) Code 22, being companies
producing textile mill products (Dixie Group, Inc., Hampshire Group, Interface,
Inc., Quaker Fabric Corp. and True Religion Apparel, Inc.). Dividend
reinvestment is assumed. (This graph was prepared for the Company by Research
Data Group, Inc. of San Francisco, CA.)
10
[Explanation of graph for purposes of electronic filing with the Securities and
Exchange Commission. Original graph not filed electronically.]
The performance graph shows dollar figures from $0 through $350 along the
left side of the graph. Along the base of the graph, the starting point is
December 29, 2000, and the graph is divided into five main segments, each
representing the Company's fiscal years from 2001 through 2005. There are three
lines on the graph:
(1) There is a solid line showing the total returns index for Burke Mills,Inc.
(2) A broken line showing the total returns index for all the U.S. companies on
the NASDAQ stock market.
(3) Another broken line showing the total returns index for five NASDAQ stocks
carrying the NASDAQ Standard Industrial Classification code 22.
The graph indicates as follows:
<table>
Total Returns
Index for: 12/29/00 12/28/01 12/29/02 1/2/04 1/1/05 12/31/05
- ---------- -------- -------- -------- ------ ------ --------
Burke Mills, Inc. 100.00 100.57 182.86 240.00 297.14 137.14
NASDAQ Stock
Market (U.S.) 100.00 70.75 51.08 76.82 85.44 96.38
SIC Codes 100.00 98.75 75.94 127.25 194.19 201.75
2200-2299
</table>
11
STOCK OPTIONS
- -------------
No officer or director of the Company was granted, exercised or realized
any stock appreciation rights, options or warrants during the fiscal year ended
December 31, 2005.
DISCRETIONARY AUTHORITY
- -----------------------
The proxy being solicited confers, and the holders of each proxy shall
have, discretionary authority to vote with respect to any of the following
matters:
(1) Matters of which the Company did not have notice by March 14, 2006.
(2) In the case in which the Company has received timely notice in
connection with an annual meeting of shareholders, if the Company includes in
the proxy statement advice on the nature of the matter and how the Company's
proxy holders intend to exercise their discretion to vote on each matter. There
are certain stipulations on the right to discretionary voting authority on such
matters spelled out in Rule 14A-4I(2) of the Rules of the Securities and
Exchange Commission.
(3) Approval of the minutes of the prior meeting but such approval shall
not amount to ratification of the action taken at that prior meeting.
(4) The election of any person to any office for which a bona fide nominee
is named in the proxy statement and such nominee is unable to serve or for good
cause will not serve.
(5) Any proposal omitted from the proxy statement and form of proxy
pursuant to Rule 14a-8 or Rule 14a-9 of the Rules of the Securities and Exchange
Commission.
(6) Matters incident to the conduct of the meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
- ------------------------------
It has been the custom of the Company for the Board of Directors to select
the independent public accounting firm for the Company each year at its annual
meeting following the annual meeting of shareholders. Therefore, no accounting
firm is being recommended to or selected at this annual meeting of shareholders.
The board's Audit Committee has approved the engagement of Scott McElveen L.L.P.
as the independent public accounting firm for the Company for the fiscal year
ending December 30, 2006, and the Board of Directors will vote at its next
annual meeting on ratifying the action of the Audit Committee. Scott McElveen
L.L.P., Columbia, SC, is the independent public accounting firm for the Company
and has audited the books of the Company for the fiscal year ended December 31,
2005. It is expected that a representative from Scott McElveen L.L.P., Columbia,
SC, will be present at the annual shareholders meeting. That
12
representative will have the opportunity to make a statement if he desires to do
so and is expected to be available to respond to appropriate questions.
CHANGES IN INDEPENDENT PUBLIC ACCOUNTANTS
- -----------------------------------------
On October 20, 2005 a representative of BDO Seidman, LLP (Seidman), the
independent registered public accounting firm then engaged as the accountant to
audit the Company's financial statements, verbally stated to the chairman of the
Company's audit committee that Seidman would resign as the Company's independent
accountant at the conclusion of its accounting services for the third quarter of
the then current fiscal year of the Company. On November 14, 2005, Seidman
concluded its accounting services for the third quarter of the Company's fiscal
year.
Seidman's report on the financial statements of the Company for either of
the past two years did not contain an adverse opinion or a disclaimer of opinion
and was not qualified or modified as to uncertainty, audit scope or accounting
principles. During the Company's two most recent fiscal years, and in the
subsequent interim period through November 14, 2005, there have been no
disagreements with Seidman on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
During the audit of the financial statements of the Company for the fiscal
year ended January 1, 2005, Seidman advised the Company that, as explained
below, internal controls necessary for the Company to develop reliable financial
statements did not exist at that point in time. The particular disclosure
controls and procedures which were not effective arose out of an error in the
company's calculation of its deferred income taxes for the fiscal year ended
January 3, 2004 and for the first three quarters of the fiscal year ended
January 1, 2005. After advice from Seidman, the Company deemed this error to be
a material weakness, as such term is defined in PCAOB Auditing Standard No. 2.
The error arose when the Company calculated the valuation allowance (mark-down)
for the fiscal year ended January 3, 2004 based upon the gross value of deferred
tax assets which was $920,000.00. The Company, after advice from Seidman,
concluded that this calculation should be restated to calculate the valuation
allowance based on the difference between deferred tax assets and deferred tax
liabilities. Deferred tax liabilities exceeded deferred tax assets by $60,000.00
during the fiscal year ended January 3, 2004. The effect of the change was to
reduce the Company's total assets as of January 3, 2004 by $60,000.00, decrease
total liabilities by $980,000.00, increase total shareholders' equity by
$920,000.00, and decrease by $920,000.00 the Company's net loss for the fiscal
year ended January 3, 2004. As a result of such advice from Seidman, the Company
addressed the material weakness subsequent to the date of its discovery on March
29, 2005. The Company incorporates herein by reference disclosures contained in
Part 2, Item 9, on the annual report to the Securities and Exchange Commission
by the Company on Form 10-K for the fiscal year ended January 1, 2005. This
matter was disclosed in Note 2 of the company's financial statements and in Item
8 and Item 9A of the Company's Form 10-K for the fiscal year ended January 1,
2005 and in Note 2 of the Company's financial
13
statements contained in the Company's Form 10-K for the fiscal year ended
December 31, 2005.
The audit committee of the Board of Directors of the Company was aware of
the advice from Seidman with respect to this error. The Company has authorized
Seidman to respond fully to inquiries of the Company's successor accountant
concerning the subject matter described above.
Other than as stated above, during the Company's two most recent fiscal
years and the subsequent interim period through March 8, 2006 there have been no
reportable events as defined in Section 304(a)(1)(v) of SEC Regulation S-K.
The Company has engaged a new independent accountant, which is the
registered public accounting firm of Scott McElveen L.L.P. of Columbia, SC, to
audit the Company's financial statements for the fiscal year ended December 31,
2005. The Company had not previously consulted Scott McElveen L.L.P.
The Company previously provided to Seidman a copy of the disclosures
contained herein. Attached hereto is a copy of a letter from Seidman addressed
to the Securities and Exchange Commission dated January 26, 2006 stating in what
respects it agrees and what respects it does not agree with the disclosures
which were contained in Form 8K/A filed by the Company with the Securities and
Exchange Commission on November 29, 2005.
AUDIT FEES
- ----------
During the fiscal year ended January 1, 2005, BDO Seidman, LLP, the
independent public accounting firm retained by the Company to audit the
Company's annual financial statements for that fiscal year and to review
financial statements included in the Company's Forms 10-Q, billed the Company
$64,600.00 for such services.
For the fiscal year ended December 31, 2005, BDO Seidman billed the Company
$19,181.16 to review the financial statements included in the Company's Forms
10-Q for that year.
For the fiscal year ended December 31, 2005, Scott McElveen L.L.P. was the
independent public accounting firm retained by the Company to audit the
Company's annual financial statements for that fiscal year. The anticipated fees
to be billed for such services by Scott McElveen L.L.P. are $46,000.00.
For the fiscal year ended December 31, 2005, BDO Seidman , LLP, billed the
Company $10,000.00 to review the annual financial statements for that fiscal
year included in the Company's annual report to the SEC on Form 10-K.
14
AUDIT RELATED FEES
- ------------------
No fees were billed in either of the last two fiscal years for assurance
and related services by the principal accountant that were reasonably related to
the performance of the audit or review of the Company's financial statements
which are not reported in the section above entitled "Audit Fees."
TAX FEES
- --------
No fees were billed in either of the last two fiscal years for professional
services rendered by the principal accountant of the Company for tax compliance,
tax advice or tax planning.
ALL OTHER FEES
- --------------
For the fiscal year ended January 1, 2005, BDO Seidman, LLP billed the
Company $6,300.00 for review and preparation of federal and state income tax
returns and $5,500.00 for a financial statement audit of the Company's 401(k)
plan.
For the fiscal year ended December 31, 2005, it is anticipated that Scott
McElveen L.L.P. will bill the Company $5,000.00 for review and preparation of
federal and state income tax returns and $5,500.00 for a financial statement
audit of the Company's 401(k) plan.
AUDIT COMMITTEE'S PRE-APPROVAL POLICIES AND PROCEDURES
- ------------------------------------------------------
It is the policy and procedure of the Audit Committee of the Board of
Directors of the Company that the committee, prior to such engagement, approves
the engagement of the independent public accounting firm retained by the Company
to audit the Company's annual financial statements, review the Company's Forms
10-Q, review and prepare federal and state income tax returns and conduct a
financial statement audit of the Company's 401(k) plan. The Audit Committee
pre-approved all services specified above under the sections entitled "Audit
Fees," "Audit Related Fees" and "All Other Fees."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -------------------------------------------------------
To the knowledge of the Company, all directors, officers and beneficial
owners of more than ten percent of the common stock of the Company and other
persons required to do so file did file on a timely basis the reports required
by Section 16(a) of the Securities Exchange Act of 1934.
15
PROPOSALS OF SHAREHOLDERS
- -------------------------
Any proposals of shareholders intended to be presented at the 2007 annual
meeting of the shareholders, now scheduled for May 15, 2007, must be received by
the Company for inclusion in the Company's proxy statement and form of proxy
relating to that meeting not later than January 1, 2007. Any matter submitted as
a shareholder proposal will be considered untimely if presented after January 1,
2007. Any such proposal must be received at the principal executive offices of
the Company.
FORM 10-K
- ---------
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED, UPON THE
WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 1O-K, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED DECEMBER
31, 2005. SUCH REQUEST SHOULD BE DIRECTED TO THOMAS I. NAIL, BURKE MILLS, INC.,
P. O. BOX 190, VALDESE, NORTH CAROLINA 28690.
16
[GRAPHIC OMITTED]
BDO Seidman, LLP 1001 Morehead Square Drive, Suite 300
Accountants and Consultants Charlotte, North Carolina 28203
Telephone: (704) 887-4236
Fax: (704) 887-4290
January 26, 2006
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Burke Mills, Inc.
(Commission File No. 0-5680)
Report under Item 4.01 of Form 8-K
Date of report - November 9, 2005
We have been furnished with a copy of the report under Item 4.01 of Form 8-K/A
(the "8-K) which we have been advised that our former client, Burke Mills, Inc.
filed with the Securities and Exchange Commission on November 29, 2005. With
respect to that 8-K, BDO Seidman, LLP does not disagree with the disclosures
related to BDO Seidman, LLP except as follows:
1. With respect to paragraph 1, on October 20, 2005, a BDO Seidman,
LLP (BDO) representative informed the audit committee chairman of
Burke Mills, Inc., that BDO was then undertaking its annual client
retention review process to determine the best allocation of BDO's
resources. The representative informed the audit committee chairman
that several factors were being considered, however, it was the
representative's belief that it was likely that the firm would resign
from the engagement subsequent to the 3rd quarter review.
2. With respect to paragraph 7, on November 9, 2005, Tom Nail, Chief
Executive Officer informed BDO that the Company's audit committee had
engaged Scott McElveen LLP to serve as the Company's
independregistered accounting firm in replacement of BDO.
Very truly yours,
s/BDO Seidman, LLP
CC: Mr. Pete Huntley, Audit Committee Chair
Mr. Tom Nail, Chief Executive Officer
[Specimen of proxy card for purposes of electronic filing
with the Securities and Exchange Commission]
BURKE MILLS, INC.
APPOINTMENT OF PROXY
Annual Meeting of Shareholders, May 16, 2006
The undersigned shareholder hereby appoints Humayun N. Shaikh, Chairman of
the Board of the Company, Thomas I. Nail, President of the Company, and Richard
F. Byers, Executive Vice President of the Company, with full power of
substitution, the lawful attorneys, agents and proxies of the undersigned to
vote all shares of Burke Mills, Inc. held by the undersigned with respect to the
election of directors, at the Annual Meeting of its shareholders to be held at
2:00 P.M. on May 16, 2006, at the executive offices of the Company in Valdese,
North Carolina, and all adjourned sessions thereof, with all the powers the
undersigned would possess if personally present at such meeting, and upon the
following matters:
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible
- --------------------------------------------------------------------------------
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK
YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE X
- --------------------------------------------------------------------------------
1. The election of the following persons who will be nominated to serve as
directors
<table>
[ ] FOR ALL NOMINEES NOMINEES:
{ } Humayun N. Shaikh
[ ] WITHHOLD AUTHORITY { } Robert P. Huntley
FOR ALL NOMINEES { } Richard F. Byers
{ } Thomas I. Nail
[ ] FOR ALL EXCEPT { } William T. Dunn
(See Instructions Below) { } Aehsun Shaikh
{ } Robert T. King
</table>
Instruction: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you
wish to withhold, as shown here: {X}
2. Such other business and matters as may be brought before the meeting or any
adjournments thereof, including any matters which are not known or anticipated a
reasonable time before the solicitation.
The shares represented by this proxy will be voted as directed by the
shareholder. If the person solicited specifies that authority to vote for a
nominee for director be withheld, the shares will be voted in accordance with
such specification. If no direction is given, the shares will be voted FOR all
nominees for director. To be voted, the proxy must be received prior to the
meeting.
1
This Appointment of Proxy Confers Upon the Holders Discretionary Authority To
Vote On The Matters Specified In The Proxy Statement Under The Heading
"Discretionary Authority."
This Appointment of Proxy is Solicited By The Board of Directors Of The Company.
[GRAPHIC OMITTED]
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this
method. [ ]
Signature of Shareholder [GRAPHIC OMITTED] Date [GRAPHIC OMITTED]
Signature of Shareholder [GRAPHIC OMITTED] Date [GRAPHIC OMITTED]
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
Telephone (828) 874-6341 Fax (828) 879-7184
[GRAPHIC OMITTED]
BURKE MILLS, INC.
FRANK GADDY YARN DIVISION
POST OFFICE BOX 190, VALDESE, NORTH CAROLINA 28690
- --------------------------------------------------------------------------------
THE YEAR IN REVIEW
During fiscal year 2005 sales for Burke Mills, Inc. were $25.3 million compared
to $25.1 million in 2004. Burke recorded a net loss of $1.9 million or $.70 per
share compared to a net loss of $1.7 million or $.62 per share in 2004.
Burke continued diversification into other fibers that it began in 2004. This
diversification helped Burke to add customers and maintain sales. In 2005 Burke
continued to see older customers' sales decline as they compete with imported
products.
Significant price increases were experienced in polyester yarn and fuel oil as a
result of Katrina and other world events that have threatened the world oil
supplies. Polyester price increases were passed to the customer further
weakening their ability to compete with imports. In the fourth quarter Burke had
a general price increase to help offset rising fuel oil and transportation cost.
Also in the fourth quarter Burke reduced operating cost by approximately
$500,000 mainly through personnel reductions.
In December the Company entered into an agreement with CIT for a revolving line
of credit. The Company ended the year with no long-term or revolving debt, and
has continued to finance its operations from funds generated from operations.
OUTLOOK
The year 2006 will be similar to 2005, in that the Company will continue to
diversify into other fibers, and sales to older customers will continue to
decline. At the beginning of 2004 the Company was totally a polyester dyer. By
the end of 2006 the Company will have 40% to 50% of its production in other
fibers.
Polyester prices have already increased twice in 2006, and water rates will
increase by 5% in July. It is difficult to predict what will happen with energy
costs. Controlling cost and improving efficiencies continue to be a challenge.
Burke entered 2006 with a solid balance sheet, no long-term debt, and a quick
ratio of 1.84 which positions the Company to be competitive in the current
textile economy.
HUMAYUN N. SHAIKH
CHAIRMAN & CEO
BURKE MILLS, INC.
Corporate Data
Directors__________________________________________________________________________________________________
Humayun N. Shaikh Robert P. Huntley
Aehsun Shaikh
Chairman and CEO Chairman Textile Executive
of the Company Timber Ridge Lumber Co. Mr. Shaikh is Director of
A supplier of hardwood lumber Azgard 9, Ltd.
to the furniture industry.
Thomas I. Nail William T. Dunn Robert T. King
President and COO Retired Retired
of the Company Mr. Dunn was an executive Mr. King was a textile
with Bear Stearns and Paine company executive.
Webber companies.
Richard F. Byers
Executive Vice President
of the Company
Officers___________________________________________________________________________________________________
Humayun N. Shaikh William E. Singleton Michael B. Smith
Chairman and CEO Vice President - Assistant Secretary
Manufacturing
Thomas I. Nail
President and COO Pender R. McElroy
Secretary
Richard F. Byers James, McElroy & Diehl
Executive Vice President Attorneys At Law
___________________________________________________________________________________________________________
SEC Form 10-K Listing of Securities Registrar/Transfer Agent
A copy of Burke Mills OTC Bulletin Board American Stock Transfer &
Form 10-K filed with the System Symbol: BMLS.OB Trust Company
Securities and Exchange 1525 West W.T. Harris Blvd.
Commission is available Legal Counsel Charlotte, NC 28288-1153
on company web site: James, McElroy & Diehl, P.A. (704) 590-7392
www.burkemills.com or Attorneys at Law
- ------------------
Edgar web site: Charlotte, NC Offices
www.edgaronline.com Burke Mills, Inc.
- -------------------
search: BMLS.OB Independent Auditors 191 Sterling Street, N.W.
Scott McElveen P.O. Box 190
Columbia, S.C. Valdese, NC 28690
(828) 874-6341
___________________________________________________________________________________________________________