Note 7 - Leases

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Lessee, Operating and Financing Leases [Text Block]

Note

7

. Leases

In

February 2016,

the FASB issued ASU

2016

-

02.

The new standard establishes a ROU model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than

12

months. In accordance with ASU

2016

-

02,

leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. On

January 1, 2019,

the Company adopted ASU

2016

-

02

under the modified retrospective method with the available practical expedients.

Operating Leases

Avalon leases golf carts, machinery and equipment for the landfill operations, furniture and fixtures for the Avalon Inn, 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

3.7

years at

March 31, 2019.

Leased property and associated obligations under operating leases at

March 31, 2019

consists of the following (in thousands):

	March 31,
	2019
Operating lease right-of-use assets	$	1,631
Current portion of obligations under operating leases	$	493
Long-term portion of obligations under operating leases		1,138
Total obligations under operating leases	$	1,631

The weighted average discount rate on operating leases was

5.01%

at

March 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, 2019

there were approximately

34.5

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 and golf course maintenance equipment and the captive landfill operations entered into a lease for a piece of equipment which were determined to be finance leases. At

March 31, 2019,

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

2

to

5

years at

March 31, 2019.   

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

2.6

years at

March 31, 2019.

Leased property and associated obligations under finance leases at

March 31, 2019

and

December 31, 2018

consists of the following (in thousands):

	March 31,			December 31,
	2019			2018
Leased property under finance leases	$	11,484		$	11,442
Less accumulated amortization		(5,500	)		(5,374	)
Leased property under finace leases, net	$	5,984		$	6,068
Current portion of obligations under finance leases	$	239		$	236
Long-term portion of obligations under finance leases		676			688
Total obligations under finance leases	$	915		$	924

The weighted average discount rate on finance leases was

4.7%

at both

March 31, 2019

and

December 31, 2018.

For the

three

months ended

March 31, 2019

and

2018,

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

	Three Months Ended
	March 31,
	2019		2018
Operating lease cost	$	91	$	85
Finance lease cost:
Depreciation on right-of-use assets	$	126	$	123
Interest on lease liabilities		11		12
Total finance lease cost	$	137	$	135

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

March 31, 2019

are as follows (in thousands):

	Finance		Operating		Total
2020	$	277	$	561	$	838
2021		267		447		714
2022		226		407		633
2023		32		256		288
2024		16		110		126
Thereafter		435		-		435
Total lease payments		1,253		1,781		3,034
Less imputed interest		338		150		488
Total		915		1,631		2,546
Less: current portion of obligations under leases		239		493		732
Long-term portion of obligations under leases	$	676	$	1,138	$	1,814