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Note 8 - Leases

9 Months Ended

Sep. 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 4.2 years. The weighted average remaining lease term on operating leases was approximately 3.0 years at September 30, 2021.

During the first nine 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 nine 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 September 30, 2021 and December 31, 2020 consists of the following (in thousands):

	September 30,		December 31,
	2021		2020
Operating lease right-of-use assets	$	1,354	$	1,728

Current portion of obligations under operating leases	$	540	$	529
Long-term portion of obligations under operating leases		814		1,199
Total obligations under operating leases	$	1,354	$	1,728

The weighted average discount rate on operating leases was 4.7% at September 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 September 30, 2021 there were approximately 32.0 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 September 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 3.7 years. The weighted average remaining lease term on the vehicles and equipment leases was approximately 2.9 years at September 30, 2021.

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

	September 30,			December 31,
	2021			2020
Leased property under finance leases	$	12,434		$	12,112
Less accumulated amortization		(6,790	)		(6,377	)
Leased property under finance leases, net	$	5,644		$	5,735

Current portion of obligations under finance leases	$	178		$	333
Long-term portion of obligations under finance leases		444			560
Total obligations under finance leases	$	622		$	893

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

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Operating lease cost:
Rental expense	$	279	$	235	$	571	$	520

Finance lease cost:
Depreciation expense	$	133	$	148	$	413	$	416
Interest expense		9		9		33		30
Total finance lease cost	$	142	$	157	$	446	$	446

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

	Finance		Operating		Total
2022	$	206	$	591	$	797
2023		132		427		559
2024		107		254		361
2025		55		159		214
2026		15		26		41
Thereafter		405		-		405
Total lease payments		920		1,457		2,377
Less: imputed interest		298		103		401
Total		622		1,354		1,976
Less: current portion of obligations under leases		178		540		718
Long-term portion of obligations under leases	$	444	$	814	$	1,258