Inventories

Inventories are valued at the lower of cost (determined on a first-in, first-out basis) or net realizable value and includes material, labor, and factory overhead. The Company maintains allowances for estimated slow-moving and obsolete inventory to reflect the difference between the cost of inventory and the estimated net realizable value. Allowances for slow-moving and obsolete inventory are determined through a physical inspection of the product in connection with a physical inventory, a review of slow-moving product, and consideration of active marketing programs. The market for education furniture is traditionally driven by value, not style, and the Company has not typically incurred significant obsolescence expenses. If market conditions are less favorable than those anticipated by management, additional allowances may be required. Due to reductions in sales volume in the past years, the Company’s manufacturing facilities are operating at reduced levels of capacity. The Company records the cost of excess capacity as a period expense, not as a component of capitalized inventory valuation.

The following table presents an updated breakdown of the Company’s inventories as of July 31, 2018, January 31, 2018 and July 31, 2017 (in thousands):



	7/31/2018		1/31/2018		7/31/2017
Finished goods	$	27,055	$	13,054	$	21,912
WIP	20,331		16,627		16,923
Raw materials	12,910		12,376		12,026
Inventories	$	60,296	$	42,057	$	50,861

Management continually monitors production costs, material costs and inventory levels to determine that interim inventories are fairly stated.