Note 7 - Leases

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Lessee, Operating and Financing Leases [Text Block]

Note

7

. Leases

Operating Leases

Avalon leases golf carts, machinery and equipment for the landfill operations, furniture and fixtures for The Grand Resort and office copiers under operating leases. On

January 1, 2019,

as a result of the adopted ASU

2016

-

02,

the Company recorded a ROU asset and related lease liability of approximately

$1.7

million. Our operating leases have remaining lease terms ranging from

1

to

5

years. The weighted average remaining lease term on operating leases was approximately

3.2

years at

March 31, 2020.

In connection with the purchase of New Castle Country Club’s real property assets on

May 13, 2019,

the Company assumed the remaining term of New Castle Country Club’s golf cart operating lease. At acquisition, the Company recorded an operating lease right-of-use asset and corresponding obligation under operating leases of approximately

$126,000.

The golf cart operating lease had a remaining lease term of

3

years at the acquisition date (See Note

16

). In addition, subsequent to the purchase, the Company also entered into new operating lease agreements for additional golf and maintenance carts. The Company recorded an operating lease right-of-use asset and corresponding obligation under operating leases of approximately

$194,000

.

Leased property and associated obligations under operating leases at

March 31, 2020

and

December 31, 2019

consists of the following (in thousands):

	March 31,		December 31,
	2020		2019
Operating lease right-of-use assets	$	1,399	$	1,466
Current portion of obligations under operating leases	$	473	$	513
Long-term portion of obligations under operating leases		926		953
Total obligations under operating leases	$	1,399	$	1,466

The weighted average discount rate on operating leases was

5.01%

at

March 31, 2020

and

December 31, 2019.

Finance Leases

In

November 2003,

Avalon entered into a long-term agreement with Squaw Creek Country Club to lease and operate its golf course and related facilities. The lease has an initial term of

ten

(

10

) years with

four

(

4

) consecutive

ten

(

10

) year renewal term options unilaterally exercisable by Avalon. Under the lease, Avalon is obligated to pay

$15,000

in annual rent and make leasehold improvements of

$150,000

per year. Amounts expended by Avalon for leasehold improvements during a given year in excess of

$150,000

will be carried forward and applied to future leasehold improvement obligations. Based upon the amount of leasehold improvements already made, Avalon expects to exercise all its remaining renewal options. At

March 31, 2020

there were approximately

33.6

years remaining on the golf course and related facilities finance lease.

In addition, the golf and related operations also entered into lease agreements for vehicles, golf course maintenance and restaurant equipment and the captive landfill operations entered into lease agreements for equipment which were determined to be finance leases. At

March 31, 2020,

the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from

1

to

5

years. The weighted average remaining lease term on the vehicles and equipment leases was approximately

2.2

years at

March 31, 2020.

Leased property and associated obligations under finance leases at

March 31, 2020

and

December 31, 2019

consists of the following (in thousands):

	March 31,			December 31,
	2020			2019
Leased property under finance leases	$	11,816		$	11,758
Less accumulated amortization		(6,011	)		(5,880	)
Leased property under finace leases, net	$	5,805		$	5,878
Current portion of obligations under finance leases	$	297		$	295
Long-term portion of obligations under finance leases		576			555
Total obligations under finance leases	$	873		$	850

The weighted average discount rate on finance leases was

5.2%

at

March 31, 2020

and

December 31, 2019.

For the

three

months ended

March 31, 2020

and

2019,

components of lease expense were as follows (in thousands):

	2020		2019
Operating lease cost:
Rental expense	$	89	$	91
Finance lease cost:
Depreciation expense	$	131	$	126
Interest expense		11		11
Total finance lease cost	$	142	$	137

Future commitments under long-term, operating and finance leases at

March 31, 2020

are as follows (in thousands):

	Finance		Operating		Total
2021	$	333	$	529	$	862
2022		291		501		792
2023		86		301		387
2024		35		149		184
2025		27		27		54
Thereafter		420		-		420
Total lease payments		1,192		1,507		2,699
Less imputed interest		319		108		427
Total		873		1,399		2,272
Less: current portion of obligations under leases		297		473		770
Long-term portion of obligations under leases	$	576	$	926	$	1,502