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Note 7 - Leases

6 Months Ended

Jun. 30, 2023

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 2.5 years to 5.0 years. The weighted average remaining lease term on operating leases was approximately 3.4 years at June 30, 2023.

During the first six months of 2023 and 2022, the Company entered into a new operating lease agreement for golf carts and golf cart GPS equipment. During the first six months of 2023 and 2022, the Company recorded operating lease right-of-use assets and corresponding obligations under the operating leases of approximately $64,000 and $31,000, respectively.

Leased property and associated obligations under operating leases at June 30, 2023 and December 31, 2022 consists of the following (in thousands):

	June 30,		December 31,
	2023		2022
Operating lease right-of-use assets	$	1,294	$	1,386

Current portion of obligations under operating leases	$	423	$	424
Long-term portion of obligations under operating leases		871		962
Total obligations under operating leases	$	1,294	$	1,386

The weighted average discount rate on operating leases was 5.12% at June 30, 2023 and 5.0% at December 31, 2022.

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 June 30, 2023 there were approximately 30.3 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 June 30, 2023, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from less than 1 year to 4.3 years. The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.0 years at June 30, 2023.

Leased property and associated obligations under finance leases at June 30, 2023 and December 31, 2022 consists of the following (in thousands):

	June 30,			December 31,
	2023			2022
Leased property under finance leases	$	12,437		$	12,004
Less accumulated amortization		(7,250	)		(7,003	)
Leased property under finace leases, net	$	5,187		$	5,001

Current portion of obligations under finance leases	$	139		$	115
Long-term portion of obligations under finance leases		463			381
Total obligations under finance leases	$	602		$	496

The weighted average discount rate on finance leases was 5.6% at June 30, 2023 and 5.2% at December 31, 2022.

For the three and six months ended June 30, 2023 and 2022, components of lease expense were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Operating lease cost:
Rental expense	$	294	$	237	$	368	$	347

Finance lease cost:
Depreciation expense	$	122	$	127	$	250	$	254
Interest expense		8		8		15		17
Total finance lease cost	$	130	$	135	$	265	$	271

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

	Finance		Operating		Total
2024	$	170	$	487	$	657
2025		159		393		552
2026		75		311		386
2027		67		165		232
2028		40		65		105
Thereafter		375		-		375
Total lease payments		886		1,421		2,307
Less: imputed interest		284		127		411
Total		602		1,294		1,896
Less: current portion of obligations under leases		139		423		562
Long-term portion of obligations under leases	$	463	$	871	$	1,334