Inventories are carried at the lower of cost or net realizable value. Cost is determined using the FIFO (first-in, first-out) method.

A summary of inventories follows:


(dollars in thousands)	October 29, 2023		October 30, 2022		April 30, 2023
Raw materials	$	8,433	$	9,859	$	7,908
Work-in-process		2,196		3,724		2,602
Finished goods		33,836		38,641		34,570
	$	44,465	$	52,224	$	45,080

We recorded a non-cash inventory (credit) charge of $(1.3) million and $5.3 million for the three months ended October 29, 2023 and October 30, 2022, respectively. The non-cash inventory credit of $(1.3) million for the three months ended October 29, 2023 represented a $(1.2) million credit related to adjustments made to our inventory markdowns reserve estimated based on our policy for aged inventory for both our mattress and upholstery fabrics segments, as well as a credit of ($78,000) for the gain on disposal of inventory related to the discontinuation of production of cut and sewn upholstery kits in Ouanaminthe, Haiti. The non-cash inventory charge of $5.3 million for the three months ended October 30, 2022 represented a $2.9 million write down of inventory to its net realizable value associated with our mattress fabrics segment, $2.3 million related to our inventory markdowns reserve estimated based on our policy for aged inventory for both our mattress and upholstery fabrics segments and a $98,000 charge for the loss on disposal and markdowns of inventory related to our exit of our cut and sew upholstery fabrics operation located in Shanghai, China. Of the $(1.3) million non-cash inventory credit for the second quarter of fiscal 2024, $(801,000) and $(482,000) pertained to our mattress fabrics and upholstery fabrics segments, respectively. Of the $5.3 million non-cash inventory charge for the second quarter of 2023, $3.8 million and $1.5 million pertained to our mattress fabrics and upholstery fabrics segments, respectively.

We recorded a non-cash inventory (credit) charge of $(2.0) million and $6.4 million for the six months ended October 29, 2023, and October 30, 2022, respectively. The non-cash inventory credit of $(2.0) million for the six months ended October 29, 2023, represented a $(2.1) million credit related to adjustments made to our inventory markdown reserve estimated based on our policy for aged inventory for both our mattress and upholstery fabrics segments, partially offset by a net restructuring related charge of $101,000. This net restructuring related charge represents markdowns of inventory totaling $179,000 during the first quarter of fiscal 2024, partially offset by a gain on disposal of inventory totaling $78,000 during the second quarter of fiscal 2024, both of which related to the discontinuation of production of cut and sewn upholstery kits at our facility in Ouanaminthe, Haiti during the respective periods. The non-cash inventory charge of $6.4 million for the six months ended October 30, 2022, represented a $2.9 million write down of inventory to its net realizable value associated with our mattress fabrics segment, a $3.4 million charge related to markdowns of inventory estimated based on our policy for aged inventory for both our mattress and upholstery fabrics segments, and a $98,000 charge related to the loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China. Of the $(2.0) million non-cash inventory credit for the first half of fiscal 2024, $(1.5) million and $(453,000) pertained to our mattress fabrics and upholstery fabrics segments, respectively. Of the $6.4 million non-cash inventory charge for the first half of fiscal 2023, $4.2 million and $2.2 million pertained to our mattress fabrics and upholstery fabrics segments, respectively.

During the second quarter of fiscal 2023, our mattress fabrics segment experienced a 35.8% decline in net sales compared with the second quarter of fiscal 2022. This decline in net sales led to a significant decrease in gross margin to (8.7%) (excluding a non-cash inventory charge of $3.8 million disclosed above) during the second quarter of fiscal 2023, as compared with gross margin of 15.0% during the second quarter of fiscal 2022. The significant decline in net sales and profitability during the second quarter of

fiscal 2023 stemmed from a greater than anticipated decline in consumer discretionary spending on mattress products, which we believe was driven by the following factors: (i) inflationary effects of commodities such as gas, food, and other necessities; (ii) a significant increase in interest rates; (iii) the pulling forward of demand for home goods products during the early years of the COVID-19 pandemic, which demand then shifted to travel, leisure, and other services; and (iv) excess inventory held by customers due to the decline in consumer demand. Based on this evidence, management conducted a thorough review of its mattress fabrics inventory and, as a result, recorded a charge of $2.9 million within cost of sales to write down inventory to its net realizable value. This $2.9 million charge was based on management's best estimates of product sales prices, customer demand trends, and its plans to transition to new products.

As of October 29, 2023, we reviewed our mattress fabrics and upholstery fabrics inventories to determine if any additional write-downs, in excess of the amount recorded based on our policy for aged inventory, were necessary. Based on our assessment, no additional write-downs of inventories to their net realizable value were recorded for the three months and six months ended October 29, 2023, other than the markdowns of inventory associated with our upholstery fabrics segment restructuring activity described more fully in Note 9 of the consolidated financial statements.

Based on the current unfavorable macroeconomic conditions, it is possible that estimates used by management to determine the write down of inventory to its net realizable value could be materially different from the actual amounts or its results. These differences could result in higher than expected markdowns of inventory, which could adversely affect the company’s results of operations and financial condition in the near term.