Leases and Commitments

12 Months Ended

Jan. 31, 2022

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. Beginning on the first day of fiscal 2020, the Company adopted ASC 842 to account for its leases. Pursuant to ASC 842, the Company uses the implicit rate when readily determinable, or the incremental borrowing rate. 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 December 2025. The Company leases 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 lease expense on a straight-line basis based on the contractual lease payments. In accordance with ASC 842, the Company recognizes the present value of the future lease commitments as an operating lease liability, and a corresponding right-of-use asset ("ROU asset"), net of tenant allowances. Tenant improvements and related tenant allowances are recorded as a reduction to the ROU asset. The Company elected to account for leases with an original term of 12 months or less that do not contain a purchase option as short-term leases. Additionally, certain of the leases provide for variable payment for property taxes, insurance, and common area maintenance payments among others. The Company recognizes variable lease expenses for these leases in the period incurred. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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


	Twelve-Months Ended
	1/31/2022			1/31/2021
	(in thousands)

Operating lease cost	$	5,086		$	5,742
Short-term lease cost	332			263
Sublease income	(40)			(40)
Variable lease cost	1,033			766
Total lease cost	$	6,411		$	6,731

Other operating leases information:

Cash paid for amounts included in the measurement of lease liabilities	$	5,482,000		$	5,163,000
Right-of-use assets obtained in exchange for new lease liabilities	$	599,000		$	622,000
Weighted-average remaining lease term (years)	3.10			4.06
Weighted-average discount rate	6.40		%	6.41		%

Minimum future lease payments (in thousands) for operating leases in effect as of January 31, 2022, are as follows:


	Operating Lease
Year ending January 31,
2023	$	5,618
2024	5,473
2025	5,473
2026	1,382
2027	—
Thereafter	—
Remaining balance of lease payments	$	17,946

Short-term lease liabilities	$	4,734
Long-term lease liabilities	11,437
Total lease liabilities	$	16,171

Difference between undiscounted cash flows and discounted cash flows	$	1,775