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 30, 2022		October 31, 2021		May 1, 2022
Raw materials	$	9,859	$	10,626	$	13,477
Work-in-process		3,724		4,480		4,237
Finished goods		38,641		48,675		48,843
	$	52,224	$	63,781	$	66,557

Substantial and Unusual Losses Resulting from Subsequent Measurement of Inventory

For the second quarter of fiscal 2023, we incurred a non-cash inventory charge totaling $5.3 million. This charge represents a $2.9 million write down of inventory to its net realizable value associated with our mattress fabrics segment, $2.3 million related to markdowns of inventory estimated based on our policy for aged inventory in both our mattress and upholstery fabrics segments, and $98,000 for the loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China (see Note 8 to the consolidated financial statements). Of the $5.3 million non-cash inventory charge for the second quarter of fiscal 2023, $3.8 million and $1.5 million pertained to our mattress fabrics and upholstery fabrics segments, respectively.

For the second quarter of fiscal 2022, we incurred a non-cash inventory charge totaling $226,000 that related to markdowns of inventory estimated based on our policy for aged inventory for both mattress and upholstery fabrics segments.

For the six-month period of fiscal 2023, we incurred a non-cash inventory charge totaling $6.4 million. This charge represents a $2.9 million write down of inventory to its net realizable value associated with our mattress fabrics segment, $3.4 million related to markdowns of inventory estimated based on our policy for aged inventory in both our mattress and upholstery fabrics segments, and $98,000 for the loss on disposal and markdowns of inventory related to the exit of our cut and sew upholstery fabrics operation located in Shanghai, China (see Note 8 to the consolidated financial statements). Of the $6.4 million non-cash inventory charge for the six-month period of fiscal 2023, $4.2 million and $2.2 million pertained to our mattress fabrics and upholstery fabrics segments, respectively.

The non-cash inventory charge of $579,000 for the six-month period of fiscal 2022 represents markdowns of inventory estimated based on our policy for aged inventory in both mattress and upholstery fabrics segments.

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 the non-cash 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, which we believe was due to 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 has now 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 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. Based on the current unfavorable macroeconomic conditions, it is possible that the 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 inventory provisions, which could adversely affect the company's results of operations and financial condition in the near term.