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Note 7 - Leases

9 Months Ended

Sep. 30, 2022

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. 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 2.9 years at September 30, 2022.

During the first nine months of 2022, the Company entered into a new operating lease agreement for golf cart GPS equipment. The Company recorded an operating lease right-of-use asset and corresponding obligation under the operating lease of approximately $31,000. 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.

Leased property and associated obligations under operating leases at September 30, 2022 and December 31, 2021 consists of the following (in thousands):

	September 30,		December 31,
	2022		2021
Operating lease right-of-use assets	$	1,191	$	1,598

Current portion of obligations under operating leases	$	478	$	534
Long-term portion of obligations under operating leases		713		1,064
Total obligations under operating leases	$	1,191	$	1,598

The weighted average discount rate on operating leases was 4.7% at September 30, 2022 and 4.6% at December 31, 2021.

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, 2022 there were approximately 31.1 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, 2022, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from less than 1 year to 4.1 years. The weighted average remaining lease term on the vehicles and equipment leases was approximately 2.9 years at September 30, 2022.

Leased property and associated obligations under finance leases at September 30, 2022 and December 31, 2021 consists of the following (in thousands):

	September 30,			December 31,
	2022			2021
Leased property under finance leases	$	12,100		$	11,978
Less accumulated amortization		(6,966	)		(6,588	)
Leased property under finace leases, net	$	5,134		$	5,390

Current portion of obligations under finance leases	$	130		$	167
Long-term portion of obligations under finance leases		401			496
Total obligations under finance leases	$	531		$	663

The weighted average discount rate on finance leases was 5.1% at September 30, 2022 and December 31, 2021.

For the three and nine months ended September 30, 2022 and 2021, components of lease expense were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Operating lease cost:
Rental expense	$	273	$	279	$	620	$	571

Finance lease cost:
Depreciation expense	$	124	$	133	$	378	$	413
Interest expense		7		9		24		33
Total finance lease cost	$	131	$	142	$	402	$	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
2023	$	155	$	524	$	679
2024		131		363		494
2025		79		269		348
2026		38		115		153
2027		19		14		33
Thereafter		390		-		390
Total lease payments		812		1,285		2,097
Less: imputed interest		281		94		375
Total		531		1,191		1,722
Less: current portion of obligations under leases		130		478		608
Long-term portion of obligations under leases	$	401	$	713	$	1,114