Leases

The Company has operating leases on real property, equipment, and automobiles that expire at various dates. The Company determines if an arrangement is a lease at inception and assesses classification of the lease at commencement. All of the Company’s leases are classified as operating leases, as a lessee. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments using company specific credit spreads. The Company’s lease terms include options to extend or terminate the lease only when it is reasonably certain that we will exercise that option. Lease expense for our operating leases is recognized on a straight-line basis over the lease term.

The Company has an operating lease for its corporate office, manufacturing and distribution facility located in Torrance, CA, currently with a remaining lease term through April 30, 2025. The Company leases machinery and equipment under a 5-year operating lease arrangement. The Company has the option of buying the assets at the end of the lease period at a price that does not result in the Company being reasonably certain of exercising the option. In addition, the Company leases trucks, automobiles, and forklifts under operating leases that include certain fleet management and maintenance services. Certain of the leases contain renewal or purchase options and require payment for property taxes and insurance. The Company records rent expense on a straight-line basis based on the contractual lease payments. Allowances from lessors for tenant improvements have been included in the straight-line rent expense for applicable locations. Tenant improvements are capitalized and depreciated over the remaining life of the applicable lease.

In accordance with ASC 842, quantitative information regarding our leases is as follows:



	Three-Months Ended			Six-Months Ended
	7/31/2019			7/31/2019
	(in thousands)

Operating lease cost	$	1,320		$	2,700
Short-term lease cost	82			136
Short-term sublease income	(20		)	(30		)
Total lease cost	$	1,382		$	2,806

Other operating leases information:

Cash paid for amounts included in the measurement of lease liabilities				$	1,320,000
Right-of-use assets obtained in exchange for new lease liabilities				$	641,000
Weighted-average remaining lease term (years)				5.4
Weighted-average discount rate				6.38		%

Minimum future lease payments (in thousands) for operating leases in effect as of July 31, 2019, are as follows:



	Operating Lease

Remaining of 2020	$	2,690
2021	4,820
2022	5,435
2023	5,085
2024	5,192
Thereafter	6,687
Remaining balance of lease payments	$	29,909

Short-term lease liabilities	$	3,275
Long-term lease liabilities	21,598
Total lease liabilities	$	24,873

Difference between undiscounted cash flows and discounted cash flows	$	5,036

In accordance with ASC 840, future minimum lease payments under non-cancelable leases as of January 31, 2019 were as follows (in thousands):



Year ending January 31,
2020	$	5,045
2021	4,405
2022	5,041
2023	5,040
2024	5,192
Thereafter	6,687
Total minimum lease payments	$	31,410

In accordance with ASC 840, rent expense for operating leases for the three and six months ended July 31, 2018 was $1,519,000 and $2,969,000 , respectively.