Question-and-Answer Session
Operator
Your first question comes from Aaron Husock - Morgan Stanley.
Aaron Husock - Morgan Stanley
On the inventory reserves, looking back historically, these haven't always been a net negative for you, looking at the charge-offs versus the sale of previously reserved inventory. It's been about neutral over time but the past few quarters it's been a significant drag on the gross margin.
Should we see that come back towards neutral some time relatively soon? Also, why haven't you been buying back the stock, given the excessive cash balance and the buyback that you put in place?
Peter Leigh
Let me deal first with your question about inventory. As you understand very well, unlike fine wine and certain cheeses, our inventory doesn't get better with age. We have to look very carefully at our inventory on a quarterly basis. The relationship between the reserves we take at any quarter end and the sales of the previously reserved products, there is no real relationship between those two numbers. They just happen to be numbers that do affect the gross margin, which is why we report them together.
But there's no real relationship between the two of them, because the sales of previously reserved inventory is just that; it's sales of material that you had on the books that you previously reserved for which you find a market, albeit most likely at a price significantly lower than the price at which the product was originally sold.
As to how this plays out going forward, that's always very hard to predict. I don't think, as a first approximation, it's wrong to assume that over time these things will be about neutral.
On the question of the stock buyback, as we say in all our public filings, the stock buyback is something that we look at carefully on a quarterly basis. We make a decision on a quarterly basis. It's a little bit like the Federal Open Markets Committee, you understand. We take a vote here. The only difference is that in our case, we don't report the vote and we don't publish the minutes.
Operator
Your next question comes from Tayyib Shah - Longbow Research.
Tayyib Shah - Longbow Research
Peter, if I could get a clarification on the margins, you had a 300 basis point headwind from the sale of reserved inventory. When you say that margin improvement going forward will be less than what we saw in this quarter, have you built a similar amount of inventory reserves in your forecast?
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