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Note 8 - Leases

6 Months Ended

Jun. 30, 2021

Lessee, Operating and Financing Leases [Text Block]

Note 8. 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. Our operating leases have remaining lease terms ranging from less than 1 year to 4.7 years. The weighted average remaining lease term on operating leases was approximately 3.4 years at June 30, 2021.

During the six months of 2021, the Company entered into new operating lease agreements for a facility and golf cart GPS equipment. The Company recorded operating lease right-of-use assets and corresponding obligations under the operating leases of approximately $67,000. During the first six months of 2020, the Company entered into a new operating lease agreement for hotel furniture. The Company recorded an operating lease right-of-use asset and corresponding obligation under the operating lease of approximately $266,000.

Leased property and associated obligations under operating leases at June 30, 2021 and December 31, 2020 consists of the following (in thousands):

	June 30,		December 31,
	2021		2020
Operating lease right-of-use assets	$	1,588	$	1,728

Current portion of obligations under operating leases	$	552	$	529
Long-term portion of obligations under operating leases		1,036		1,199
Total obligations under operating leases	$	1,588	$	1,728

The weighted average discount rate on operating leases was 4.7% at June 30, 2021 and December 31, 2020.

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 June 30, 2021 there were approximately 32.3 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 June 30, 2021, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from less than 1 year to 3.9 years. The weighted average remaining lease term on the vehicles and equipment leases was approximately 2.7 years at June 30, 2021.

Leased property and associated obligations under finance leases at June 30, 2021 and December 31, 2020 consists of the following (in thousands):

	June 30,			December 31,
	2021			2020
Leased property under finance leases	$	12,391		$	12,112
Less accumulated amortization		(6,657	)		(6,377	)
Leased property under finace leases, net	$	5,734		$	5,735

Current portion of obligations under finance leases	$	271		$	333
Long-term portion of obligations under finance leases		502			560
Total obligations under finance leases	$	773		$	893

The weighted average discount rate on finance leases was 4.8% at June 30, 2021 and 4.5% at December 31, 2020.

For the three and six months ended June 30, 2021 and 2020, components of lease expense were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Operating lease cost:
Rental expense	$	208	$	196	$	292	$	285

Finance lease cost:
Depreciation expense	$	139	$	137	$	280	$	268
Interest expense		11		10		24		21
Total finance lease cost	$	150	$	147	$	304	$	289

For the twelve months ending June 30, future commitments under long-term, operating and finance leases are as follows (in thousands):

	Finance		Operating		Total
2022	$	302	$	610	$	912
2023		148		491		639
2024		109		332		441
2025		99		173		272
2026		15		102		117
Thereafter		405		-		405
Total lease payments		1,078		1,708		2,786
Less imputed interest		305		120		425
Total		773		1,588		2,361
Less: current portion of obligations under leases		271		552		823
Long-term portion of obligations under leases	$	502	$	1,036	$	1,538