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:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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BURKE MILLS, INC.
- -------------------------------------------------------------------------------
Notice of 2007 Annual Meeting
and
Proxy Statement
- --------------------------------------------------------------------------------
BURKE MILLS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
2007
===============================================================================
The 2007 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 15, 2007, 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 28, 2007 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 6, 2007
=============================
PROXY STATEMENT
=============================
Annual Meeting of the
Shareholders of Burke Mills, Inc.
to be held May 15, 2007
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 17, 2007.
VOTING RIGHTS
- -------------
The holders of stock of the Company on March 28, 2007 are the only
shareholders entitled to notice of and to vote at the annual meeting of
shareholders on May 15, 2007 and at any adjournments thereof. On March 28, 2007
(the record date) there were
1
2,741,168 shares of stock outstanding and entitled to vote. Each share of stock
is entitled to one vote.
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 12, 2007 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):
Title of Name and Address of Amount and Nature of Percent
Class Beneficial Owner Beneficial Ownership of Class
- ----- ---------------- -------------------- ---------
Common Naseus, Inc. 1,443,329 shares 52.7%
Stock Flat 72, Building 383 (Direct)
Road 1912
Manama Town 319, Bahrain
2
Common Humayun N. Shaikh 1,443,329 shares 52.7%
Stock Azgard Nine Limited (Indirect)
Ismail Aiwan-i-Science
Shahrah-i-Jalaluddin Roomi
Lahore - 54600, Pakistan
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 as of March 12, 2007 Cede & Co.
held 1,142,838 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.
The Company is informed and believes that Robert E. Bell, III is the
beneficial owner of 116,100 shares of the Company's common stock, and Virginia
E. Bell is the owner of 116, 100 shares of the Company's common stock. 116,100
shares represents 4.24% of the common stock of the Company. Robert E. Bell, III
and Virginia E. Bell are brother and sister. The Company is unaware that either
person, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has voting power or investment power
of the other person's shares or that either person shares with the other any
voting power or investment power of common stock of the Company. The Company is
unaware, that these two persons have agreed to act together for purposes of
voting, holding or disposing of the common stock of the Company.
ELECTION OF DIRECTORS
- ---------------------
Seven directors are to be elected at the annual meeting of shareholders to
be held on May 15, 2007. 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
Amount (Shares)
and Nature of
Name Principal Beneficial Percent
(Age)(Year lst Elected) Occupation Ownership of Class
- ----------------------- ---------- --------------- --------
Humayun N. Shaikh Chairman of 1,443,329 52.7%
(64) (1978) the Company (Direct
and Indirect)
Thomas I. Nail President of 7,000 0.26%
(59) (2000) the Company (Direct)
William T. Dunn Retired 2,000 0.07%
(73) (1996) (Direct)
Robert P. Huntley Chairman, 5,000 0.18%
(69) (1993) Secretary (Direct)
and Treasurer,
Timber Ridge Lumber Co.
Hickory, NC
Robert T. King Retired 0 0.0%
(80) (2001)
Richard F. Byers Executive Vice 1,000 0.0%
(68) (2001) President of the Company (Direct)
Aehsun Shaikh Director, 0 0.0%
(34) (1999) Azgard Nine Limited
Lahore, Pakistan
All nominees are incumbents.
"Direct" ownership means ownership as record owner. "Indirect" ownership
means beneficial ownership other than as record owner.
Mr. Dunn, Mr. Huntley and Mr. King are independent as defined in Rule
4200(a) (15) of the Marketplace Rules of the National Association of Securities
Dealers.
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.
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(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 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 FNB
United 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.
5
The Board of Directors of the Company met once during the fiscal year ended
December 30, 2006. All directors attended except Mr. Aehsun Shaikh.
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. The members of
the Audit Committee of the Company are independent as members of the Audit
Committee as defined by Rule 4200(a)(15) of the Marketplace Rules of the
National Association of Securities Dealers.
Mr. Dunn, who serves as Chairman, Mr. Huntley and Mr. Shaikh (who is
Chairman and Chief Executive Officer of the Company) serve on the Compensation
Committee. The Compensation Committee met once 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. Mr. Huntley and Mr. Dunn are
independent as members of the Compensation Committee as defined by Rule 4200
(a)(15) of the Marketplace Rules of the National Association of Securities
Dealers. Mr. Shaikh is Chairman and Chief Executive Officer of the Company. The
Compensation Committee does not have a charter.
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)(15) of The Marketplace Rules
of the National Association of Securities Dealers. Mr. Huntley is independent as
the Audit Committee Financial Expert as defined by Rule 4200(a)(15)of the
Marketplace Rules of the National Association of Securities Dealers.
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Mr. Huntley graduated from the University of North Carolina with a degree
in accounting and passed the North Carolina Certified Public Accountant
examination in April 1965. Mr. Huntley worked in both the tax and audit areas
with J.A. Grisett & Co. from 1964 until 1982 then with Deloitte Haskins & Sells
upon merger of J.A. Grisett & Co. into Deloitte Haskins & Sells in 1982. Mr.
Huntley was the engagement partner on numerous financial institution audits and
audits of other publicly traded companies. Mr. Huntley served as partner in
charge of the Hickory office for both J.A. Grisett & Co. and Deloitte Haskins &
Sells. In May 1987, Mr. Huntley entered private business. Mr. Huntley still
holds his certified public accountant license.
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 30, 2006.
The Audit Committee has discussed with the independent auditors of the
Company the matters required to be discussed by Statement on Auditing Standards
No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380) as
adopted by the Public Company Accounting Oversight Board in Rule 3200T.
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 adopted by the Public Company Accounting
Oversight Board in Rule 3600T, and has discussed with the independent accountant
the independent accountant's independence.
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 (which is the
Company's annual report to shareholders) for the fiscal year ended December 30,
2006.
The members of the Audit Committee are:
Robert P. Huntley, Chairman
William T. Dunn
Robert T. King
7
EXECUTIVE AND DIRECTOR COMPENSATION
- -----------------------------------
The Compensation Committee and the Board of Directors met on November 14,
2006 to establish its processees and procedures for consideration and
determination of executive and director compensation. The Committee determined
that its scope of authority would be to review, near the end of each fiscal
year, the current level of compensation of executive officers and directors and
make a recommendation to the Board of Directors for any changes in such
compensation. The Compensation Committee does not anticipate delegating any
authority in making such consideration and determination. Mr. Shaikh is the
Chairman and Chief Executive Officer of the Company, and serves as a member of
the Compensation Committee. Accordingly, he has one of three votes in
recommending the amount or form of the executive and director compensation.
Neither the Compensation Committee nor the Board of Directors retain the
services of any compensation consultants in carrying out its duties.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
- -----------------------------------------------------------
Currently, and during the last completed fiscal year, the members of the
Compensation Committee were Mr. Dunn, Chairman, Mr. Huntley and Mr. Shaikh. Mr.
Shaikh is Chairman and Chief Executive Officer of the Company. The other members
of the Compensation Committee do not have any relationships requiring disclosure
pursuant to Section 402 of SEC Regulation S-K.
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 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. Any
director candidates recommended by shareholders would be given consideration by
the board members.
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COMMUNICATIONS TO THE BOARD
- ---------------------------
It is the policy of the Company that any communication from a shareholder
of the Company addressed to any member or all members of the Board of Directors
and sent to the office of the Company (P.O. Box 190, Valdese, NC 28690) 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 16, 2006.
STOCK OWNED BY OFFICERS
- -----------------------
As of March 12, 2007, 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:
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)
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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 executive
officers Humayun N. Shaikh, Thomas I. Nail and Richard F. Byers, are as follows:
William E. Singleton (age 57) 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. Mr. Singleton is an executive
officer of the Company.
Pender R. McElroy (age 66) 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. Mr. McElroy is not
an executive officer of the Company.
Michael B. Smith (age 49) 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. Mr. Smith is not an executive officer of the
Company.
COMPENSATION DISCUSSION AND ANALYSIS
- ------------------------------------
The Company has relatively modest sales revenue for a public company. The
Company struggles to survive in the U.S. textile industry, which has been
declining over the last 15 years due to importation of foreign products priced
far below American products. Its customer base is diminishing as customers
close, go into bankruptcy or are acquired. Many customers are purchasing less
volume. Accordingly, in setting compensation, the objectives of the Company's
compensation programs are to retain the services of its executive officers while
attempting at the same to maintain company expense for executive compensation at
a reasonable level. The Company's compensation programs are extremely modest in
scope as well as amount. The Company's compensation programs are designed to
reward its executive officers for the services they provide to the Company, to
reward their loyalty in remaining with the Company even in difficult times, and
to provide incentive for such officers to remain employed by the Company in the
future.
10
The elements of compensation of executive officers of the Company are base
salary, use of a company car, life insurance of $100,000.00, accidental death
insurance of $100,000.00 and long term disability insurance. Since 2002, the
Company has paid no bonuses. The Company does not have any programs, or any
plans to initiate any programs, for elements of compensation other than the
forgoing.
The Company determines the amount of base salary commensurate with the
roles and responsibilities. The Company also takes into account, to the extent
it has accurate information, the level of pay of executive officers of other
similar textile companies having the approximate revenue and level of business
operations of the Company. With regard to benefits, the Company offers minimal
benefits very modest in scope, and the Company feels that its benefits to
executive officers are the minimum benefits that should be offered to executive
officers for retention purposes.
The Company does not have any long term or deferred compensation program.
The Company's policy for allocating between cash and noncash compensation is
simply that the Company provides a base salary and provides minimal benefits of
noncash compensation.
With regard to corporate performance, setting compensation policies and
making compensation decisions, the Compensation Committee, the Board of
Directors and management is aware that the Company has sustained a net loss over
the last five years. However, while sustaining losses, the Company has survived
and continues to attempt to procure new business, retain existing business and
keep expenses within reason in a highly competitive and rapidly declining
industry. The Compensation Committee, Board of Directors and management of the
Company deem that, even though the Company has lost money for five fiscal years,
other companies similarly situated would have closed their doors or been sold
out for virtually nothing, while the Company has survived and sustained itself
during very challenging times. To that extent, discretion can be and has been
exercised in setting relatively modest base salaries and noncash compensation
even though the Company is not profitable. Discretion has been exercised with
regard to all executive officers. Each executive officer of the Company is
considered by the Compensation Committee, the Board of Directors and management
to render above level performance and contribute to the survival of the Company.
The elements of individual performance and contribution taken into account with
regard to Mr. Shaikh and Mr. Nail include as major factors their leadership in
the overall strategic direction of the Company for the future, decisions with
regard to supervision of sales and marketing, manufacturing operation and
decisions with regard to the level of expenses incurred by the Company. With
regard to Byers, the elements include his supervision of the sales and marketing
efforts of the Company, supervision of other salespersons, sustaining existing
customers, adding new customers, and maintaining effective communications with
customers both before and after the sale. With regard to Mr. Singleton, his
elements include the time needed to produce yarn product between the time of the
order and the time of delivery, the quality of the yarn products, the efficiency
and morale of workers in the plant and the promptness and effectiveness of
response to quality problems.
11
The Company's policies and decisions regarding the adjustment or recovery
of awards or payments is nonexistent. The Company does not anticipate at any
time having to recover any cash or noncash compensation from its executive
officers. No factors have been considered in decisions to increase or decrease
material compensation to executive officers since, for the last four years,
there has been no material increase or decrease in compensation of executive
officers.
The Company has no contract, agreement, plan or arrangement, written or
unwritten, providing for payments in connection with any termination of
employment or change in control. The accounting and tax treatment of forms of
compensation is done on advice of the outside auditors of the company and
treatments are believed to be in accordance with Generally Accepted Accounting
Principles. The Company has no requirements or guidelines with regard to
ownership of stock in the Company. The Company has not engaged in any
benchmarking of total compensation or any material element of compensation.
Executive officers involved in determining executive compensation are Mr.
Shaikh, who is a member of the Compensation Committee and Chairman and Chief
Executive Officer of the Company, and Mr. Nail as President and Chief Operating
Officer of the Company. That involvement was to make recommendations to the
Compensation Committee with regard to executive compensation consistent with the
policy and guidelines previously explained.
The Company has no plan-based awards. The Company has no outstanding equity
awards. The Company has no outstanding stock options.
The Company maintains no pension or other plan for payments or other
benefits at, following or in connection with retirement. The company does
maintain a standard and customary 401(k) Plan available to all employees. The
Company's 401(k) Plan is a tax-qualified defined contribution plan. The Company
maintains no nonqualified defined contribution or other nonqualified deferred
compensation plans. The Company has made no discretionary contributions to its
401(k) Plan in the last three fiscal years.
The Company has no agreement, plan or arrangement, written or unwritten,
providing for payment to any named executive officer at, following or in
connection with any termination, including, without limitation, resignation,
severance, retirement or constructed termination, or a change in control or a
change in any executive officer's responsibilities. No executive officer has a
written or unwritten employment agreement.
COMPENSATION OF EXECUTIVE OFFICERS
- ----------------------------------
All plan and non-plan compensation awarded to, earned by, or paid to
Humayun N. Shaikh, Thomas I. Nail and Richard F. Byers for the past three fiscal
years is shown in the following table:
12
SUMMARY COMPENSATION TABLE
Fiscal Year Ended December 30, 2006
-----------------------------------
Name and All Other
Principal Position Year Salary Bonus Compensation Total
- --------------------------------------------------------------------------------
Humayun N. Shaikh, 2004 $210,000 0 $258 $210,258
Chairman and CEO 2005 $210,000 0 $396 $210,396
(principal executive 2006 $210,000 0 $804 $210,804
officer)
Thomas I. Nail, 2004 $150,000 0 $7,278 $157,278
President and COO 2005 $150,000 0 $6,742 $156,742
(principal financial 2006 $150,000 0 $12,517 $162,517
officer)
Richard F. Byers, 2004 $104,988 0 $1,546 $106,534
Executive Vice 2005 $104,988 0 $1,510 $106,498
President 2006 $104,988 0 $1,503 $106,491
There is no executive officer of the Company other than those named above
whose total compensation exceeded $100,000 for the last completed fiscal year.
During the last fiscal year, the Company made no stock awards and no option
awards, and had no non-equity incentive compensation plan.
The category of All Other Compensation includes the annual premium on group
life insurance for each officer on the amount in excess of $50,000 of coverage,
accidental death insurance of $100,000 and long term disability insurance. For
Mr. Nail and Mr. Byers, the category of All Other Compensation includes the
nonbusiness portion of use of a company owned automobile by Mr. Nail and Mr.
Byers.
Mr. Shaikh's travel expenses on behalf of the Company are reimbursed to him
by the Company.
13
COMPENSATION OF DIRECTORS
- -------------------------
Following is information concerning the compensation of members of the
Board of Directors of the Company for the last completed fiscal year.
DIRECTOR COMPENSATION
Fiscal Year Ended December 30, 2006
- --------------------------------------------------------------------------------
Fees Earned or All Other
Name Paid in Cash Compensation Total
- ---- ------------ ------------ -----
William T. Dunn $ 12,000 $37 $12,037
Robert P. Huntley $ 12,000 $37 $12,037
Robert T. King $ 12,000 $37 $12,037
Aehsun Shaikh $ 0 $37 $ 37
Compensation for Humayun N. Shaikh, Thomas I. Nail and Richard F. Byers is
shown in the Summary Compensation Table for executive officers.
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 $2,000.00 per quarter, payable at the end of quarter, and
$1,000.00 for each board meeting and each committee meeting. If a committee
meeting is combined with or occurs on a day where there is a Board meeting, no
extra payment is made for the committee meeting on that day.
No Director receives any compensation based on stock awards, option awards,
non-equity incentive compensation plan, pension plan, non qualified deferred
plans (unless the Director is an employee, in which case such director would be
eligible to be a participant in the Company's 401(k) Plan).
TRANSACTIONS WITH RELATED PARTIES
- ---------------------------------
The Company pays Humayun N. Shaikh $24,000 annually toward the expense of
maintaining and operating an office for the Company on the premises of Azgard
Nine Limited (Azgard) in Pakistan. The Company may from time to time purchase
yarn from Azgard. During the fiscal year ended December 30, 2006, the Company
did not purchase yarn from
14
Azgard. As of March 12, 2007, it is not known whether the Company will purchase
additional yarn from Azgard, although such purchases could reasonably be
anticipated. Mr. Humayun N. Shaikh and Mr. Aehsun Shaikh are directors of
Azgard, and Mr. Humayun N. Shaikh and his family control a majority of the stock
of Azgard.
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 30, 2006.
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 12, 2007.
(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.
15
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 29, 2007, 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 30,
2006. It is expected that a representative from Scott McElveen L.L.P., Columbia,
SC, will be present at the annual shareholders meeting. That 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
16
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 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 12, 2007 there have been
no reportable events as defined in Section 304(a)(1)(v) of SEC Regulation S-K.
The Company engaged the registered public accounting firm of Scott McElveen
L.L.P. of Columbia, SC, to audit the Company's financial statements for the
fiscal years ended December 31, 2005 and December 30, 2006. 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
- ----------
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
17
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.
For the fiscal year ended December 30, 2006, 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 fees billed for
such services by Scott McElveen L.L.P. were $46,000.00.
For the fiscal year ended December 30, 2006, BDO Seidman, LLP, billed the
Company $10,600.00 to review the annual financial statements for that fiscal
year included in the Company's annual report to the SEC on Form 10-K.
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 December 31, 2005, Scott McElveen L.L.P. billed
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.
For the fiscal year ended December 30, 2006, it is anticipated that Scott
McElveen L.L.P. will bill the Company $5,000.00 for review and preparation of
federal
18
and state income tax returns and $5,600.00 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" 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 so file did file on a timely basis the reports required by
Section 16(a) of the Securities Exchange Act of 1934.
PROPOSALS OF SHAREHOLDERS
- -------------------------
Any proposals of shareholders intended to be presented at the 2008 annual
meeting of the shareholders, now scheduled for May 20, 2008, 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, 2008. Any matter submitted as
a shareholder proposal will be considered untimely if presented after January 1,
2008. Any such proposal must be received at the principal executive offices of
the Company.
SHAREHOLDERS SHARING AN ADDRESS
- -------------------------------
One annual report (the Company's annual report to the SEC of Form 10-k) and
this proxy statement are being delivered to multiple shareholders sharing an
address unless the Company has received contrary instructions from one or more
of the shareholders. The Company will undertake to promptly deliver upon written
or oral request a separate copy of the annual report and proxy statement to a
shareholder at a shared address to which a single copy of the document was
delivered and provide
19
instructions as to how a shareholder can notify the Company that the shareholder
wishes to receive a separate copy of the annual report and proxy statement. A
shareholder can direct a notification to the Company that the shareholder wishes
to receive a separate annual report and proxy statement in the future by
contacting the Company as follows:
Burke Mills, Inc.
PO Box 190
Valdese, NC 28690
828 874-6341
Any shareholder sharing an address can request delivery of a single copy of
annual reports and proxy statements if they are receiving multiple copies of
annual reports and proxy statements by contacting the Company and providing the
appropriate instructions.
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
30, 2006. SUCH REQUEST SHOULD BE DIRECTED TO THOMAS I. NAIL, BURKE MILLS, INC.,
P. O. BOX 190, VALDESE, NORTH CAROLINA 28690.
20
BDO 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
1
[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 15, 2007
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 15, 2007, 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
[ ] FOR ALL NOMINESS NOMINESS:
[]Humayun N. Shaikh
[ ] WITHHOLD AUTHORITY []Robert P. Huntley
FOR ALL NOMINESS []Richard F. Byers
[]Thomas I. Nail
[ ] FOR ALL EXCEPT []William T. Dunn
(See Instructions Below) []Aehsun Shaikh
[]Robert T. King
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: [GRAPHIC OMITTED]
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.
[GRAPHIC OMITTED]
Signature of Shareholder Date
---------------------------- --------
Signature of Shareholder Date
---------------------------- --------
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.
2
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
Burke Mills, Inc. sales during 2006 were $23,884,000 compared to $25,253,000 in
2005. Burke recorded a net loss of $1,877,000 or $.68 per share compared to a
net loss of $1,901,000 or $.70 per share in 2005.
Burke continued to diversify into other fibers and developed significant
commission (the dyeing and processing of customer owned yarns) customers.
Commission pounds in 2006 accounted for 21% of total pounds shipped versus 5% in
2005. An advantage of processing on a commission basis is, Burke does not tie up
cash in raw yarn inventory.
Burke's largest supplier of textured yarns, Dillon Yarns, was purchased by
Burke's largest competitor, Unifi Corporation. Unifi has told Burke that it will
continue to supply textured yarns to Burke at a competitive price.
During the year Burke had developed other sources of textured yarns to lower
cost.
OUTLOOK
If the trend in the industry continues, domestic demand will decrease causing
greater over capacity for dyed yarn. It will be more difficult to maintain or
increase sales.
Burke will continue to diversify into other fibers and develop programs for
niche markets.
HUMAYUN N. SHAIKH
CHAIRMAN & CEO
1
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
________________________________________________________________________________
1