8. Long-Term Debt and Lines of Credit

A summary of long-term debt and lines of credit follows:


(dollars in thousands)	July 31, 2011			May 1, 2011
Unsecured senior term notes	$	11,000		$	11,000
Canadian government loan		488			547
		11,488			11,547
Current maturities of long-term debt		(2,409	)		(2,412	)
Long-term debt, less current maturities of long-term debt	$	9,079		$	9,135

Unsecured Term Notes

In connection with the Bodet & Horst acquisition in 2008, we entered into a note agreement dated August 11, 2008. This agreement provided for the issuance of $11.0 million of unsecured term notes with a fixed interest rate of 8.01% and a term of seven years. Principal payments of $2.2 million per year are due on the notes beginning August 11, 2011. The principal payments are payable over an average term of 4 years through August 11, 2015. This agreement contains customary financial and other covenants as defined in the agreement.

We made our first principal payment of $2.2 million associated with this note agreement on August 11, 2011.

Government of Quebec Loan

We have an agreement with the Government of Quebec for a term loan that is non-interest bearing and is payable in 48 equal monthly installments (denominated in Canadian dollars) commencing December 1, 2009. The proceeds were used to partially finance capital expenditures at our Rayonese facility located in Quebec, Canada.

Revolving Credit Agreement – United States

At July 31, 2011, we had an unsecured Amended and Restated Credit Agreement that provided for a revolving loan commitment of $6.5 million, including letters of credit up to $3.0 million. This agreement was set to expire August 15, 2012 and provided for a pricing matrix to determine the interest rate payable on loans made under the agreement (applicable interest rate of 2.19% at July 31, 2011). As of July 31, 2011, there were $125,000 in outstanding letters of credit (all of which related to workers compensation). At July 31, 2011 and May 1, 2011, there were no borrowings outstanding under the agreement.

On August 25, 2011, we entered into a seventeenth amendment to the Amended and Restated Credit Agreement, amending the agreement that was effective as of July 31, 2011 (the end of our first quarter of fiscal 2012). This amendment extends the expiration date of the line of credit through August 25, 2013, increases the revolving loan commitment from $6.5 million to $10.0 million, and decreases the capital expenditure limit for fiscal years 2012 and 2013 from $10.0 million to $6.0 million.

At September 9, 2011, borrowings of $3.5 million were outstanding under this agreement to fund current working capital requirements.

Revolving Credit Agreement – China

At July 31, 2011, we had an unsecured credit agreement associated with our operations in China that provided for a line of credit of up to approximately $6.2 million and expired on September 2, 2011. This agreement had an interest rate determined by the Chinese government. There were no borrowings outstanding under the agreement as of July 31, 2011 and May 1, 2011.

On September 2, 2011, we renewed our unsecured credit agreement associated with our operations in China. The renewal extended the agreement to September 2, 2012 and provided for a line of credit up to approximately $6.2 million.

Overall

Our loan agreements require, among other things, that we maintain compliance with certain financial covenants. At July 31, 2011, the company was in compliance with these financial covenants.

At July 31, 2011, the principal payment requirements of long-term debt during the next five years are: Year 1 – $2.4 million; Year 2 - $2.4 million; Year 3 - $2.3 million; Year 4 - $2.2 million; and Year 5 - $2.2 million.

The fair value of the company’s long-term debt is estimated by discounting the future cash flows at rates currently offered to the company for similar debt instruments of comparable maturities. At July 31, 2011, the carrying value of the company’s long-term debt was $11.5 million and the fair value was $10.1 million. At May 1, 2011, the carrying value of the company’s long-term debt was $11.5 million and the fair value was $10.2 million.