Note 7 - Leases

9 Months Ended

Sep. 30, 2020

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. 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

2.7

years at

September 30, 2020.

In connection with the purchase of New Castle Country Club's real property assets on

May 13, 2019,

the Company assumed the remaining term of New Castle Country Club's golf cart operating lease. At acquisition, the Company recorded an operating lease right-of-use asset and corresponding obligation under operating leases of approximately

$126,000.

The golf cart operating lease had a remaining lease term of

3

years at the acquisition date (See Note

16

). In addition, subsequent to the purchase, the Company entered into new operating lease agreements for golf and maintenance carts. The Company recorded an operating lease right-of-use asset and corresponding obligation under operating leases of approximately

$194,000

.

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, 2020

and

December 31, 2019

consists of the following (in thousands):

	September 30,		December 31,
	2020		2019
Operating lease right-of-use assets	$	1,280	$	1,466
Current portion of obligations under operating leases	$	533	$	513
Long-term portion of obligations under operating leases		747		953
Total obligations under operating leases	$	1,280	$	1,466

The weighted average discount rate on operating leases was

4.96%

at

September 30, 2020

and

5.01%

at

December 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

September 30, 2020

there were approximately

33.1

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, 2020,

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

1

to

5

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

3.1

years at

September 30, 2020.

Leased property and associated obligations under finance leases at

September 30, 2020

and

December 31, 2019

consists of the following (in thousands):

	September 30,			December 31,
	2020			2019
Leased property under finance leases	$	12,209		$	11,758
Less accumulated amortization		(6,296	)		(5,880	)
Leased property under finace leases, net	$	5,913		$	5,878
Current portion of obligations under finance leases	$	343		$	295
Long-term portion of obligations under finance leases		622			555
Total obligations under finance leases	$	965		$	850

The weighted average discount rate on finance leases was

4.7%

at

September 30, 2020

and

5.2%

at

December 31, 2019.

For the

three

and

nine

months ended

September 30, 2020

and

2019,

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Operating lease cost:
Rental expense	$	235	$	298	$	520	$	586
Finance lease cost:
Depreciation expense	$	148	$	124	$	416	$	376
Interest expense		9		11		30		33
Total finance lease cost	$	157	$	135	$	446	$	409

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

September 30, 2020

are as follows (in thousands):

	Finance		Operating		Total
2021	$	385	$	586	$	971
2022		207		432		639
2023		132		265		397
2024		107		91		198
2025		55		3		58
Thereafter		420		-		420
Total lease payments		1,306		1,377		2,683
Less imputed interest		341		97		438
Total		965		1,280		2,245
Less: current portion of obligations under leases		343		533		876
Long-term portion of obligations under leases	$	622	$	747	$	1,369