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Note 8 - Leases

3 Months Ended

Mar. 31, 2022

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 5.0 years. The weighted average remaining lease term on operating leases was approximately 3.5 years at March 31, 2022.

During the first three 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 three months of 2021, 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 $37,000.

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

	March 31, 2022		December 31, 2021
Operating lease right-of-use assets	$	1,588	$	1,598

Current portion of obligations under operating leases	$	519	$	534
Long-term portion of obligations under operating leases		1,069		1,064
Total obligations under operating leases	$	1,588	$	1,598

The weighted average discount rate on operating leases was 4.6% at March 31, 2022 and 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 March 31, 2022 there were approximately 31.6 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 March 31, 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 4.6 years. The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.2 years at March 31, 2022.

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

	March 31, 2022			December 31, 2021
Leased property under finance leases	$	12,016		$	11,978
Less accumulated amortization		(6,715	)		(6,588	)
Leased property under finace leases, net	$	5,301		$	5,390

Current portion of obligations under finance leases	$	157		$	167
Long-term portion of obligations under finance leases		493			496
Total obligations under finance leases	$	650		$	663

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

For the three months ended March 31, 2022 and 2021, components of lease expense were as follows (in thousands):

	Three Months Ended March 31,
	2022		2021
Operating lease cost:
Rental expense	$	110	$	84

Finance lease cost:
Depreciation expense	$	127	$	141
Interest expense		9		13
Total finance lease cost	$	136	$	154

For the twelve months ending March 31, future commitments under long-term, operating and finance leases are as follows (in thousands):

	Finance		Operating		Total
2023	$	186	$	577	$	763
2024		135		495		630
2025		127		304		431
2026		64		255		319
2027		38		84		122
Thereafter		390		-		390
Total lease payments		940		1,715		2,655
Less: imputed interest		290		127		417
Total		650		1,588		2,238
Less: current portion of obligations under leases		157		519		676
Long-term portion of obligations under leases	$	493	$	1,069	$	1,562