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Indebtedness

12 Months Ended

Aug. 31, 2012

7. Indebtedness

Notes Payable to Banks—During the years ended August 31, 2012 and 2011, the Company utilized operating lines of credit with certain banks to fulfill its short-term financing needs. Total outstanding balances of the lines of credit were $1.6 million and $1.0 million as of August 31, 2012 and 2011. These lines of credit had maturity dates of six to eight months from the date of draw down, and bore fixed interest rates of 1.8% per annum as of August 31, 2012 and ranging from 1.3% to 1.7% per annum as of August 31, 2011, and variable interest rate of 1.8% per annum for one of the lines of credit as of August 31, 2012. Borrowings are secured by the Company's property, plant and equipment. Total unused amounts on the lines of credit were $6.5 million and $7.3 million as of August 31, 2012 and 2011, respectively.

Long-term Debt—Long-term debt as of August 31, 2012 and 2011 consists of the following loans with a bank (in thousands):

	August 31, 2012			August 31, 2011

First note payable	$	1,712		$	1,901
Second note payable		681			1,044
Third note payable		892			1,243
Fourth note payable		2,635			2,898

Total long-term debt		5,920			7,086
Less: Current installments		(967	)		(981	)

Total long-term debt, excluding current installments	$	4,953		$	6,105

The long-term notes in the table above carry variable interest rates ranging from 1.8% to 2.0%, are payable in monthly installments, and are secured by the Company's property, plant and equipment. The interest rates are based on the annual time deposit rate plus a certain spread. The first note payable requires monthly payments of principal and interest in the amount of $13 thousand over the 15-year term of the note with final payment to occur in May 2024. The second note payable requires monthly payments of principal and interest in the amount of $29 thousand over the five-year term of the note with final payment to occur in August 2014. The third note payable requires monthly payments of principal and interest in the amount of $28 thousand over the five-year term of the note with final payment to occur in May 2015. The fourth note payable requires monthly payments of principal and interest in the amount of $19 thousand over the 15-year term of the note with final payment to occur in December 2025. The notes do not have prepayment penalties or balloon payments upon maturity of the notes.

The Company capitalized interest in the amount of $4 thousand, $27 thousand and $9 thousand during the years ended August 31, 2012, 2011 and 2010, respectively.

The scheduled principal payments for the Company's long-term debt as of August 31, 2012 consist of the following (in thousands):

Years Ending August 31,	Scheduled Principal Payments

2013	$	967
2014		985
2015		571
2016		327
2017		333
Thereafter		2,737

Total	$	5,920

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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