Note 7 - Leases

9 Months Ended

Sep. 30, 2024

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. Our operating leases have remaining lease terms ranging from less than 1 year to 5.0 years. The weighted average remaining lease term on operating leases was approximately 3.8 years and 3.4 years at September 30, 2024 and December 31, 2023, respectively.

During the first nine months of 2024 and 2023, the Company entered into a new operating lease agreement for golf carts, GPS equipment and office copiers. During the first nine months of 2024 and 2023, the Company recorded operating lease right-of-use assets and corresponding obligations under the operating leases of approximately $684,000 and $323,000, respectively.

Leased property and associated obligations under operating leases at September 30, 2024 and December 31, 2023 consists of the following (in thousands):

	September 30,		December 31,
	2024		2023
Operating lease right-of-use assets	$	1,418	$	1,270
Current portion of obligations under operating leases	$	340	$	432
Long-term portion of obligations under operating leases		1,078		838
Total obligations under operating leases	$	1,418	$	1,270

The weighted average discount rate on operating leases was 6.6% and 5.9% at September 30, 2024 and December 31, 2023, respectively.

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, 2024 there were approximately 29.1 years remaining on the golf course and related facilities finance lease. At December 31, 2023 there were approximately 29.8 years remaining on the golf course and related facilities finance lease. The net asset value of finance leases, excluding leasehold improvements was $0.7 million and $0.8 million at September 30, 2024 and December 31, 2023, respectively.

In addition, the Company also entered into lease agreements for a vehicle, golf course maintenance and the captive landfill operations entered into lease agreements for equipment which were determined to be finance leases. At September 30, 2024, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from less than 1 year to 4.8 years. The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.7 and 3.4 years at September 30, 2024 and December 31, 2023.

Leased property and associated obligations under finance leases at September 30, 2024 and December 31, 2023 consists of the following (in thousands):

	September 30,			December 31,
	2024			2023
Leased property under finance leases	$	13,329		$	13,131
Less accumulated amortization		(7,806	)		(7,420	)
Leased property under finace leases, net	$	5,523		$	5,711
Current portion of obligations under finance leases	$	189		$	198
Long-term portion of obligations under finance leases		634			598
Total obligations under finance leases	$	823		$	796

The weighted average discount rate on finance leases was 6.8% at September 30, 2024 and 6.3% at December 31, 2023.

For the three and nine months ended September 30, 2024 and 2023, components of lease expense were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Operating lease cost:
Rental expense	$	257	$	282	$	480	$	585
Finance lease cost:
Depreciation expense	$	161	$	129	$	431	$	379
Interest expense		12		13		41		28
Total finance lease cost	$	173	$	142	$	472	$	407

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

	Finance		Operating		Total
2025	$	246	$	428	$	674
2026		206		432		638
2027		166		348		514
2028		125		243		368
2029		57		200		257
Thereafter		360		-		360
Total lease payments		1,160		1,651		2,811
Less: imputed interest		337		233		570
Total		823		1,418		2,241
Less: current portion of obligations under leases		189		340		529
Long-term portion of obligations under leases	$	634	$	1,078	$	1,712