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Note 3 - Debt

12 Months Ended

Aug. 31, 2014

3.

DEBT

Long-term debt consists of the following:

	August 31, 2014		August 25, 2013

Building related mortgages & term debt	$	4,004,765	$	4,162,425
Capitalized lease obligations		6,165,519		7,927,880
		10,170,284		12,090,305
Less current portion		1,615,041		1,921,708
Long-term debt	$	8,555,243	$	10,168,597

In August 2012, the Company announced that it was expanding its Monticello, Minnesota facility. The 47,000 square foot expansion roughly doubled the amount of manufacturing space of the Company had and increased the total facility size to approximately 107,000 square feet. The expansion was completed in the Company’s fiscal 2013 fourth quarter and cost approximately $3.8 million which was paid for by a combination of cash on hand and a new mortgage agreement with its bank which was finalized in May 2013.

The new mortgage with its bank was for $4.2 million, carries an interest rate of 2.843%, requires monthly payments of $22,964 based on a 20 year amortization schedule and matures on May 8, 2018. The new mortgage satisfied the original mortgage of $1.1 million and provided the Company $3.1 million to use toward its building expansion project. The original mortgage that has been paid off had an interest rate of 4.38% with monthly payments of $7,637 based on a 25-year amortization schedule. Both the new and original mortgages were secured by all assets of the Company.

Maturities of long-term debt are as follows:

Fiscal years ending August:
2015	$	1,615,041
2016		1,346,483
2017		1,370,066
2018		4,625,741
2019		793,049
Thereafter		419,904

Included in the consolidated balance sheet at August 31, 2014 are cost and accumulated depreciation on equipment subject to capitalized leases of $11,587,284 and $5,625,683, respectively. At August 25, 2013, the amounts were $12,749,183 and $5,019,442, respectively. The capital leases carry interest rates from 3.5% to 6.9% and mature from 2015 – 2020.

The present value of the net minimum payments on capital leases which is included in long-term debt as of August 31, 2014 is as follows:

Fiscal years ending August:
2015	$	1,665,291
2016		1,336,547
2017		1,309,416
2018		1,187,944
2019		822,233
Thereafter		426,587
Total minimum lease payments		6,748,018
Less amount representing interest		582,499
Present value of net minimum lease payments		6,165,519
Current portion		1,452,769
Capital lease obligation, less current portion	$	4,712,750

Line of Credit:

At February 1, 2014, the Company renewed and modified its Revolving Line of Credit with its bank. Under the agreement the Company could borrow up to $1 million. The agreement expires on February 1, 2015, is collateralized by all assets of the Company and carries an interest rate of LIBOR plus 2%. The agreement also contains restrictive provisions requiring a minimum net worth ratio, a maximum debt to tangible net worth ratio as well as a debt service coverage ratio. At August 31, 2014, the Company was in compliance with these provisions. There were no amounts outstanding related to its revolving credit agreement at August 31, 2014 and August 25, 2013, respectively.

- 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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